1/1^^   ^3 


SOUTHERN  BRANCH. 

UNIVERSITY  OF  CALlFORmA, 

LIBRARY, 

iLOS  ANGELES,  CALIF. 


/  i 


Digitized  by  the  Internet  Archive 

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DEBATERS'  HANDBOOK  SERIES 


COMPULSORY  INSURANCE 


Debaters'  Handbook  Series 

American    Merchant    Marine 

Debaters'  Manual  (2d  ed.  enl.) 

Capital    Punishment    (3d   ed.    rev.) 

Central  Bank  of  the  United  States 

Child  Labor   (2d  ed.  rev.  and  enl.) 

City  Manager  Plan 

Commission  Plan  of  Municipal  Govern- 
ment (3d  ed.  rev.  and  enl.) 

Compulsory  Arbitration  of  Industrial 
Disputes  (Supp.  to  2d  ed.)     50c 

Compulsory   Insurance 

Compulsory  Military  Training 

Conservation   of    Natural   Resources 

Direct  Primaries  (4th  ed.  rev.  and  enl.) 

Election  of  U.   S.   Senators   (2d  ed.) 

Employment  of  Women 

Federal  Control  of  Interstate  Corpora- 
tions   (2d  ed.   rev.  and  enl.) 

Free  Trade  vs.  Protection 

Government  Ownership  of  Railroads 
(3d  ed.  rev.   and  enl.) 

Government  Ownership  of  Telegraph 
and    Telephone 

Immigration    (2d   ed.) 

Income  Tax  (3d  ed.  rev.  and  enl.) 

Initiative  and  Referendum  (3d  ed.  rev.) 

Minimum    Wage 

Monroe  Doctrine  (2d    ed.  rev.  and  enl.) 

Mothers'   Pensions 

Municipal  Ownership   (3d  ed.)     $1.50 

National  Defense  Vol.  I 

National  Defense.  Vol.  II 

Open  versus  Closed  Shop  (2d  ed.) 

Parcels  Post    (2d  ed.  rev.  and  enl.) 

Prohibition  (2d  ed.) 

Recall    (2d  ed.   rev.   and   enl.) 

Reciprocity 

Single  Tax    (2d  ed.) 

Trade  Unions    (2d  ed.   enl.) 

Unemployment 

Woman  Suffrage   (3d  ed.  rev.) 

World  Peace    (2d  ed.   rev.  and  enl.) 

Other  titles  in  preparation 

Each    volume,    unless    otherwise    noted, 

$1.25  net 


Debaters'       H  a    n    d    b    o    o    h       Series 


SELECTED  ARTICLES 


ON 


COMPULSORY  INSURANCE 


COMPILED  BY 
EDNA    D.    BULLOCK 


46183 


NEW  YORK 

THE  H.  W.  WILSON  COMPANY 

1918 


A^ 


EXPLANATORY  NOTE 


^  The  selections   in  this  handbook  are  designed  to  include 

information  and  argument  on  some  of  the  questions  arising 
out  of  what  is  generally  called  "social  insurance".  This 
may  be  defined  as  the  formal  provision  made  by  or  for  work- 
'7  ing  people  against  the  vicissitudes  of  life — including  sick- 
ness,  industrial  accident,  invalidity,  unemployment,  old  age 
and  dependency. 

The    attention    of    thinking    people    all    over    the    civilized 
world    is    being   focused    on    this    subject.      Varied    forms    of 
legislative    experiment    are    in    progress — many    new    and    in- 
teresting ones  are  being   proposed.     Many   of  the  problems 
involve  intricate  legal  technicalities  that  have  no  place   in  a 
compilation  intended  for  popular  use.     These  are  included  in 
the  bibliography,  which  is  wider  in  scope.     The  rapid  march 
of  events  in  the  field  of  social  insurance  leads  to  constant  re- 
view of  the  whole  subject  in  the  books  and  magazines.     This 
renders  much  of  the  older   literature  of  no  particular  value 
S    for   the   student — hence   the   exclusion   from  the  bibliography 
5(4^    of    much    excellent    literature    that    has    been    superseded    by 
N    more    available   material. 

Oj  The   general    trend    of   legislation    is    toward    compulsory 

insurance,  and  the  title  chosen  for  this  volume  is  a  recogni- 
tion of  this  tendency.  No  one  question  for  debate  has  been 
considered  in  the  selections,  but  the  following  topics  are 
suggested  as  among  those  most  widely  discussed  in  the 
United  States: — 

Is  the  German  system  of  social  insurance  adapted  to  con- 
ditions in  the  United  States? 

Is  compulsory  state  insurance  the  best  form  of  insurance 
for  working  people? 

What    is    the    best    provision    against    unemployment? 


vi  EXPLANATORY  NOTE 

Should  compulsory  state  insurance  of  workmen's  compen- 
sation for  industrial  accidents  be  substituted  for  the  exist- 
ing forms  of  employers'  liability  laws  in  the  United  States? 
•  Should  a  system  of  old  age  pensions  be  adopted? 

In  lieu  of  a  brief,  a  resume  of  the  principal  arguments  on 
the    general    subject   is    included. 

August,   1912. 


CONTENTS 

Argument     ix 

Bibliography 

Bibliographies   xvii 

General   References 

a.  Social  Insurance xviii 

b.  Systems  of  Insurance  Adopted   in  Various  Coun- 
tries              xxi 

Germany    xxi 

Great  Britain  and  Dependencies    xxii 

Industrial  Accidents  and  Workmen's  Compensation    ....       xxiii 
a.     Laws  and   Court  Decisions    xxvii 

Insurance  Plans  of  Individual  Corporations   xxxii 

Old-Age   Pensions    •. .  . .     xxxiii 

Unemployment    Insurance    xxxiv 

Introduction 

Henderson,    Charles    Richmond.      Logic     of     Social     Insur- 
ance        Annals  of  the  American  Academy      5 

Boyd,  James  Harrington.     Some  Features  of  Obligatory  In- 
dustrial Insurance  . . .   Annals  of  the  American  Academy     19 

Rubinow,   I.   M.     Compulsory   Insurance    Chautauquan     27 

Brandeis,   Louis   D.     Greatest  Life  Insurance  Wrong 

Independent     42 

Lewis,  Frank  W.     State  Insurance   50 

Hastings,   Hugh.     Dangers  of   State   Insurance    

North    American    Review     60 

Sherman,    P.    T.      Compensation    Law    and    PrjyTit'V-T^-tt^;^^^-' 
Annals  of  the  American  Academy        ^2 

Nichols,  Walter  S.     Argument  Against  Liability  .  T7^. 

Annals  of  the  American  Academy    81 

Dawson,    Aliles    M.      System    Best    Adapted    to    the    United 
States    Annals  of  the  American  Academy     88 


viii  CONTEXTS 

Dawson,    Miles    'M.     Cost  of  Insurance   

Annals  of  the  American  Academy     97 

Cheney,   Howell.     Employers  and   Compensation   Systems... 

Annals  of  the  American  Academy  lOi 

Irwin,  Will.     Industrial  Indemnity  Century  104 

Dawson,    Miles   M.      Employers'   Liability   Insurance 

Industrial   Engineering   and   the   Engineering   Digest  112 

Hard,  William.     Pensioners   of   Peace    Everybody's  118 

Hard,  William.     Injured  in  the  Course  of  Duty;  Conclusion.  141 
Hatch,  L.  W.     Employers'  Liability  or  Workmen's  Compen- 
sation ?  . . .   New  York.     Labor,  Department  of.     Bulletin  147 

Dawson,  Miles  M.     Workmen's  Compensation    Survey  162 

Washington's  "Yes"  to   New   York's   "No"    Survey  173 

Moot,  Adelbert.     Reasons  for  Trying  Workmen's   Compen- 
sation        Survey  175 

Seager,   Henry   Rogers.      Workmen's    Compensation    for   the 

United  States   Survey  177 

Slobodin,  Henry  L.     Dr.  Friedensburg's  Arraignment  of  the 

German  Workingmen's  Insurance  System    Survey  180 

Schwedtman,    F.    C.      Difference    Between   the    English    and 

German  Systems  of  Workmen's  Compensation  . .   Survey  i8i 
Zacher,  Georg.     German  Workingmen's  Insurance  and  For- 
eign Countries    American  Journal  of  Sociology  184 

Howe,   Frederic  C.     How  Germany  Cares  for  her  Working 

People    Outlook  194 

Lennox,   P.  J.     Insuring  a  Nation.  .North  American  Review  197 
Brodsky,  Randolph  J.     Struggle  for  the  British  Health  Bill. 

Survey  205 

Accident  Relief  of  the  U.  S.  Steel  Corporation   ....    Survey  215 

Baldwin,  F.  Spencer.     Old  Age  Pension  Schemes  

Quarterly  Journal  of  Economics  218 

Israels,  Belle  Lindner.     Poverty  and  Insurance  for  the  Un- 
employed        Charities   and  the   Commons  242 

Insurance  Against  Unemployment  Living  Age  251 

Compulsory  Insurance  Against  Unemployment    . .    Spectator  255 
Roberts,   Elmer.     Experiments  in   Germany  with  Unemploy- 
ment  Insurance    Scribner's    Magazine  256 


ARGUMENT  FOR  COMPULSORY  SOCIAL 
INSURANCE 


The  advocate  of  compulsory  social  insurance  is  met  at 
the  outset  by  the  inherent  human  disinclination  for  compul- 
sion of  any  kind.  Resentment  at  the  intrusion  of  the  state 
upon  what  has  long  been  considered  private  ground  is  an 
every  day  incident.  The  game  warden  who  confiscates  the 
contents  of  the  hunter's  bag — perhaps  on  the  hunter's  own 
land;  the  fire  warden  who  drops  into  a  shop  and  orders  the 
sawdust  removed  from  the  floor;  the  food  inspector  who 
prosecutes,  in  the  name  of  the  state,  the  vendor  of  ancient 
eggs  or  short  weight  loaves;  the  health  officer  who  calls  at 
the  door  and  demands  the  immediate  installation  of  $200 
worth  of  sanitary  plumbing  when  the  family  bank  account 
is  at  the  vanishing  point;  the  attendance  officer  who  hales 
the  parents  of  a  persistent  truant  before  the  juvenile  court 
— all  these,  and  many  others,  are  frequently  regarded  by  the 
recipients  of  their  attentions  as  being  engaged  in  unwarrant- 
ed meddling  with  the  personal  liberties  of  human  beings. 

To  the  average,  self-centered  human  mind,  the  efifect  of  a 
law  or  an  ordinance  on  hiinself  is  the  first  and  only  consid- 
eration. Until  he  has  acquired  the  social  consciousness,  he 
resists  all  sorts  of  what  he  considers  encroachments  on  his 
personal  liberties. 

The  compulsory  insurance  advocate  has  to  meet  this  idea 
from  three  sources — the  beneficiary,  if  he  is  forced  to  con- 
tribute from  his  wages  for  insurance,  and  the  employer  and 
taxpayer,  if  any  portion  of  the  incidence  of  insurance  is 
thrown  upon  them.  The  wage  earner  will  say  that  he  is 
unwilling  to  have  any  part  of  his  wages  withheld,  that  he 
needs  it  and  is  entitled  to  dispose  of  every  penny  of  it  as  he 


X  ARGUMENT 

sees  fit,  that  he  will  make  his  own  insurance  arrangements. 
The  taxpayer  will  argue  that  he  should  not  be  taxed  to  ben- 
efit improvidence,  idleness  and  inefficiency.  The  employer 
feels  that  his  profits  should  not  be  forcibly  reduced  by  con- 
tributions that,  he   avers,  will   only   encourage   thriftlessness. 

Then  comes  the  alarmist  and  cries  "Socialism".  This 
frightful  bugaboo  is  all  the  more  difficult  to  slay  because 
of  the  ignorance  of  the  average  American  concerning  the 
underlying  principles  of  socialism,  and  his  wilful  blindness 
to  the  American  modification  and  application  of  socialistic 
ideas.  The  specter  of  a  paternal  government  reaching  out 
for  individual  liberties  is  a  stock  argument  of  conservatives, 
individualists  and  social  pirates  against  any  change  that  will 
alter  the  equilibrium  of  the  world  of  dollars,  and  loosen  their 
own  grasp   of  power. 

In  harmony  with  all  these  is  the  constitutional  objector, 
who  doubts  the  power  of  the  central  government  to  inaugu- 
rate such  legislation,  and  has  not  the  interest  or  the  courage 
to  push  it  to   adoption,   state   by   state. 

It  is  urged  that  any  effort  to  do  for  working  people  what 
they  ought  to  do  for  themselves  will  result  in  a  loss  of  self 
respect  on  their  part,  will  encourage  improvidence,  and  warp 
the  moral  nature  of  the  masses  by  constant  temptation  to 
idleness  and   deceit. 

All  existing  systems  of  compulsory  state  insurance  have 
been  subject  to  criticism  because  of  the  weaknesses  of  pub- 
lic administration.  Opponents  of  the  introduction  of  such  a 
system  in  the  United  States  point  to  the  evidences  of  in- 
efficiency in  the  public  service,  and  the  maladministration 
of  public  funds  so  deplorably  common. 

With  such  a  formidable  array  of  indictments  against  it, 
the  compulsory  state  insurance  idea  has  triumphed  in  the 
progressive  countries  of  Europe,  and  has  gained  a  foothold  in 
the  United  States. 

The  argument  in  favor  of  the  adoption  of  some  system 
of  compulsory  insurance  for  people  who  work  for  wages 
must  rest  on  a  knowledge  of  the  conditions  under  which 
such  people  live.     If  it  can  be  established  that  a  considerable 


ARGUMENT  xi 

part  of  our  people  work  for  wages  that  cannot  be  made  to 
provide  them  with  decency,  comfort  and  opportunity,  much 
less  enable  them  to  be.  prepared  for  emergencies  and  mis- 
fortunes, then  it  would  be  obvious  that  so  much  of  our  in- 
dustrial system  is  parasitic,  and  requires  revision.  An 
excursion  into  the  cost  of  living  problem  made  for  the  Rus- 
sell Sage  Foundation  has  established  that  the  least  income 
upon  which  a  family  with  three  children  under  fourteen 
years  of  age  can  have  decency  and  sufficient  comfort  to 
maintain  bodily  and  mental  health  is  $900  a  year  in  New 
York  City,  and  $600  to  $700  in  smaller  places.  When  the 
thousands  who  do  not  have  this  minimum  standard  income 
are  considered,  a  noticeable  portion  of  our  industrial  system 
must  be  branded  as  parasitic.  Suppose  the  union  scale  for 
carpenters  in  a  given  city  to  be  35  cents  an  hour,  and  the 
union  day  to  be  eight  hours.  A  daily  wage  of  $2.80,  pro- 
viding that  work  was  to  be  had  every  day  except  Sundays 
and  six  legal  holidays  annually,  would  mean  an  income  of 
$859.50,  upon  which,  it  is  admitted,  the  family  of  five  could 
maintain  a  mimimum  American  standard  of  living  in  all  but 
the  larger  cities.  It  is  improbable  that  carpenters,  generally, 
have  so  high  a  scale  of  pay  or  are  able  to  work  307  days 
a  year.  This  trade,  being  one  that  affords  fairly  constant 
work  and  at  least  25  cents  an  hour  wage  scale  in  average 
cities,  represents  an  index  of  the  upper  edge  of  the  scale  of 
compensation  of  working  people.  Vast  numbers  of  families, 
even  where  women  and  children  are  also  wage  earners,  do 
not  attain  the  minimum  of  $600  or  $700  in  the  smaller  towns. 
Recent  government  investigations  into  wages  and  living  con- 
ditions in  Lawrence,  Massachusetts  reveal  a  wage  scale 
that  does  not  admit  of  decency,  comfort  or  opportunity.  So 
deplorable,  indeed,  were  the  revelations  that  many  of  the 
details  are  believed  to  have  been  suppressed.  The  industries 
investigated  were  clearly  parasitic.  Some  of  them  paid 
handsome  dividends — putting  into  the  pockets  of  non-partici- 
pants in  the  activities  of  the  business  the  profit  that  should 
have  been  partially  distributed  among  the  workers  as  wages 
honestly   earned.     It  would  be   a   most   obtuse   moral   sense. 


vy 


xii  ARGUMENT 

socially  speaking,  that  would  recognize  the  justice  of  a  dec- 
laration  of  dividends  in    a  parasitic   industry. 

It  is  not  overstating  conditions  to  say  that  hundreds  of 
thousands  of  wage  earners  in  the  United  States  do  not  re- 
ceive sufficient  compensation  to  support  life  in  the  most 
meager  fashion,  without  the  aid  of  friends  or  charity,  or 
worse — loss  of  what  is  called  virtue.  It  is  estimated  that  a 
working  girl  in  a  large  city  should  have  a  wage  of  at  least 
$8  a  week  in  order  to  keep  herself  well  and  respectable. 
Great  numbers  of  girls  whose  pay  for  long  and  wearisome 
hours  of  toil  is  far  below  $8  a  week  are  to  be  found  in  any 
city. 

-Tite— i:jQnstantly  rising  cost  of  living  with  no  correspond- 
ing rise  in  wages  and  small  salaries  has  placed  thousands 
of  American  working  people  on  the  border  line  of  poverty. 
On  this  plane  of  living  there  is  no  margin  for  insurance. 
Nor  is  there  much  margin  for  the  much  better  paid  wage 
earner.  The  cost  of  insurance  in  private  companies,  fraternal 
orders  and  labor  unions  is  so  high  that  life,  accident  and 
annuity  insurance  are  with  difficulty  carried  by  one  member 
of  the  average  family  of  five  with  an  income  of  $1,200.  A 
family  of  the  same  size  with  an  income  of  $600,  obviously, 
could  carry  only  a  little  industrial  life  insurance,  at  most. 
Neither  do  these  incomes  admit  of  any  other  provision 
against   the    costly    vicissitudes   of   life. 

How  then,  are  these  emergencies  to  be  met?  Is  the 
present  system  of  resting  the  burden  on  the  shoulders  least 
able  to  bear  it,  and  then,  when  they  sink  under  the  load, 
transferring  it  to  public  and  private  charity,  to  be  continued 
indefinitely?  Or,  is  the  sense  of  social  justice  strong  enough 
to  demand  a  living  wage,  and  suitable  provision  for  accident, 
sickness,  unemployment,  old  age  and  dependency?  If  so, 
what  is  the  ideal  method  of  attaining  the  desired  end? 
European  countries  have  partially  answered  these  questions 
by  the  adoption  of  systems  of  compulsory  state  insurance. 
The  unwillingness  of  nearly  all  human  beings  to  submit 
to  compulsion  need  scarcely  be  reckoned  as  a  serious  ob- 
jection to  any  measure   for   social   betterment,   since  compul- 


ARGUMENT  xiii 

sion  may  not  be  escaped  by  any  one — not  even  Crusoe  on 
his  island.  The  employer  and  employee  who  resent  com- 
pulsory insurance,  the  taxpayer  who  opposes  the  payment  of 
public  funds  for  social  insurance  purposes,  must,  in  turn, 
submit  to  compulsory  taxes  to  support  pub'lic  charities.  Be- 
tween compelling  a  man  to  give  up  some  of  his  earnings 
to  support  public  charities,  and  requiring  him  to  lay  by  in 
a  safe  place,  part  of  his  earnings  to  meet  the  almost  certain 
financial  emergencies  of  his  own  life,  there  is  little  comfort 
for  the   advocate   of   personal  liberty. 

The  employer's  objection  to  compulsion  in  the  enforced 
contributions  to  state  insurance  for  working  people  is  no 
more  valid  than  that  of  the  employee.  Industry  will  have 
to  bear  the  burden  of  wear  and  tear  on  all  the  material 
and  machines  required  to  maintain  it — including  human  ma- 
chines.     When    it    does    not    do    that    it    becomes    parasitic.  . 

The  taxpayer's  objection  to  compulsory  insurance  to 
which  the  state  contributes  is  short  sighted,  as  an  equivalent 
amount  would  be  concealed  in  the  tax  levy  under  the  in- 
creased taxes  for  public  charities  and  corrections.  It  ought 
not  to  require  statistics  to  convince  the  average  intelligence 
that  inability  to  meet  the  normal  emergencies  of  life  breeds 
paupers  and  criminals,  and  that  these  must  be  cared  for  by 
the  taxpayer. 

Nor  are  people  of  even  average  intelligence  longer  to  be 
frightened  by  the  cry  of  "Socialism"  whenever  special  privil- 
ege is  threatened  by  any  proposition  for  collective  effort. 
Socialism  in  the  United  States  has  resolved  itself  into  munic- 
ipal, state,  and  national  enterprises  for  the  furtherance  of 
the  general  welfare.  Whenever  this  can  be  attained  more 
effectively  and  economically  by  collective  effort  than  by 
private  enterprise,  the  name  given  to  the  particular  mani- 
festation of  civic  enterprise  is  immaterial. 

The  general  government  has  seldom  attempted  "general 
welfare"  legislation — but  it  is  well  within  the  possibilities. 
The  constitutional  objector  is  faint  hearted.  The  constitu- 
tion may  not  be   made   for  man — but  any  day  that   man   dis- 


xiv  ARGUMENT 

covers  that  he  prefers  to  have  it  so  constructed,  he  can 
have  things  started  in  that  direction.  Meantime,  constitu- 
tional compulsory  insurance  has  been  established  in  Wash- 
ington— and   if  in  Washington,  why  not  in   other  states? 

It  is  possible  that  the  knowledge  that  adequate  sick  and 
unemployment  benefits,  workmen's  compensation  and  old 
age  pensions  have  been  provided  would  deter  some  consti- 
tutionally inert  people  from  being  industrious,  economical 
and  thrifty.  In  most  countries  where  compulsory  insurance 
is  in  effect  the  benefits  are  purposely  meager  in  order  that 
every  incentive  to  saving  and  providence  shall  remain.  In 
Great  Britain  the  maximum  old  age  pension  is  five  shillings 
($1.25)  a  week.  Obviously  the  candidate  for  a  pension  must 
have  other  sources  of  income  if  he  avoids  going  on  the  poor 
rates. 

Most  national  systems  of  insurance  are  contributory  on 
the  part  of  both  employers  and  employees — sometimes  also, 
the  state  subsidizing  in  addition.  In  such  systems  malinger- 
ing is  discouraged  by  the  personal  interest  that  all  work- 
men have  in  reducing  payments. 

Nor  is  it  reasonable  to  ask  working  people  to  provide 
for  the  emergencies  of  life  out  of  the  wages  that  a  majority 
of  them  receive.  With  higher  wages,  the  state  could  very 
appropriately  and  justly  say:  "You  must  save  against 
emergencies.  Government  will  care  for  your  payments  and 
guarantee  the  specified  benefits."  Such  a  system  is  com- 
pulsory only  for  the  improvident,  in  reality,  since  the  provi- 
dent are  under  no  compulsion  when  required  by  law  to  do 
what  they  would  have  done  in  any  event.  The  experience 
of  Germany  is  evidence  enough  that  the  social  insurance 
system  there  in  operation  does  not  pauperize  the  workers 
or  induce  loss  of  self  respect.  The  system  is  so  adjusted 
as  to  throw  the  incidence  of  burden  where  it  belongs — on 
the  individual,  on  the  industry  and  on  the  state.  The  work- 
man receiving  benefit  feels  that  he  receives  simply  deferred 
installments  of  his  just  dues   for  services   rendered. 

Misuse  of  public  funds  must  be  admitted  as  an  objection 
to   any  plan   involving  more  public   officials   to  handle  more 


ARGUMENT  xv 

money;  but  before  regarding  this  as  an  important  objection, 
it  must  be  made  clear  that  private  insurance  enterprises 
would  be  free  from  graft,  and  mismanagement  easy  to  ad- 
just. Publjc  officials  are  more  and  more  required  to  be 
hop-est.  There  is  abundant  reason  to  believe  that  state  in- 
surance funds  could  be  economically  and  safely  managed. 
The  state  cannot  go  out  of  business  because  a  few  grafters 
exist. 

With  a  skilfully  drawn  law,  there  is  no  reason  why  any 
state  in  the  union  should  not  have  an  adequate  social  in- 
surance   system. 

The  trend  towards  social  justice  is  broadening.  The 
producer  of  wealth  will  one  day  have  his  fair  share  of  the 
fruits   of   his   labor. 

EDNA  D.  BULLOCK. 


BIBLIOGRAPHY 


A  star    (*)    preceding  a  reference  indicates   that   the   entire  ar- 
ticle or  a  part  of  it  has  been  reprinted  in  this  volume. 


Bibliographies 

Chautatiquan.    41:    78-9.    ]\Ir.    '05.    Civic    Progress    Program: 

Compulsory  Insurance. 
Foerster,   Robert    F.   Social   Insurance.    (Harvard  University. 

Guide    to   Reading   in   Social    Ethics   and   Allied    Subjects. 

1910). 
Indiana.    State    Library,    Legislative    Reference    Department. 

Select  Bibliography  on  Employers'  Liability.  1911.   (State 

Bar  Association  of  Indiana). 
Journal    of    Political    Economy.    Bibliography    of    Economics 

for    1909.    University    of    Chicago    Press. 
Robbins,    E.    Clyde.    High    School    Debate    Book.    pp.    33-43. 

Age    Pensions.    McClurg.    Chicago.    1911. 

A  brief  is  also  included. 
United    States.    Library    of    Congress — Division    of    Bibliog- 
raphy. Select  List  of  References   on   Employers'  Liability 

and   Workmen's    Compensation.     1911. 

For    sale    by    the    Superintendent    of    Public    Documents,    Wash- 
ington, D.   C.     20  cents. 

United  States.  Library  of  Congress — Division  of  Bibliog- 
raphy. Select  List  of  References  on  Old  Age  and  Civil 
Service   Pensions.    1903. 

For    Sale   by   the    Superintendent   of   Public   Documents,    Wash- 
ington, D.   C.     10  cents. 

United  States.  Library  of  Congress — Division  of  Bibliog- 
raphy. Select  List  of  References  on  Workingmen's  In- 
surance.    1908. 

For   sale    by    the    Superintendent    of    Public    Documents,    Wash- 
ington, D.   C.     10  cents. 

Virginia.    State    Library.    Legislative    Reference    Lists.     1912. 


xviii  BIBLIOGRAPHY  ' 

I.     General  References 

a.     Social  Insurance 

Books,  Paml^Jilets  and  Documents 

Adams,  Thomas  S.  and  Sumner,  Helen  L.  Labor  Problems. 
1905.    Compulsory    Insurance,    pp.    488-93. 

Alden,    Percy.    Democratic    England.    1912.    Macmillan. 

Bliss,  William  D.  P.  New  Encyclopedia  of  Social  Reform, 
under  Industrial  Insurance,  Old-age  Pensions,  Unemploy- 
ment. 

Bolen,  George  Lewis.  Getting  a  Living.  1903.  Macmillan. 
Chapter  21.  Workingmen's   Insurance   and  Pensions. 

Carr,  A.  V.  and  Others.  National  Insurance.  1912.  Macmillan. 

Dryden,  John  F.  Industrial  Insurance;  Its  History  in  Eng- 
land and  America.  (Yale  Insurance  Lectures.  1904.  pp. 
184-99). 

Frankel,   Lee  K.  and    Dawson,   Miles   M.  Workingmen's   In- 
surance in  Europe.  1910.  Russell  Sage  Foundation. 
Bibliography  pp.  437-42. 

Haines,  Thornwell.  Insurance  for  Workmen  in  Foreign 
Countries.  U.  S.  Consular  Reports.  No.  295.  Ap.  '05. 

Henderson,    Charles    Richmond.    Industrial    Insurance    in   the 
United    States.    1909.    University    of    Chicago    Press. 
Bibliography  pp.   323-6. 

International  Congress  on  Social  Insurance.  Reports.  1889- 
1908. 

*Lewis,  Frank  Wesley.  State  Insurance,  a  Social  and  In- 
dustrial Need.    1909.   Houghton. 

National    Civic    Federation.    Proceedings,    v.    10,    1909. 

National  Conference  of  Charities  and  Correction.  Proceed- 
ings, 1905-6.  Reports  of  Committee  on  Workingmen's 
Insurance. 

National  Conference  on  the  Prevention  of  Destitution.  Re- 
port of  Proceedings,  191 1.  London.  P.  S.  King  and  Son. 
Sickness  and  Invalidity  Insurance,  pp.  102-25. 

Radley,  C.  J.  Self  Help  versus  State  Pensions.  3d.  Ed. 

Seager,    Henry    Rogers.    Social    Insurance.    1910. 


BIBLIOGRAPHY  xix 

Shadwell,  Arthur.  Industrial  Efficiency,  a  Comparative  Study 
of  Industrial  Life  in  England,  Germany  and  America. 
2v.    1909.    Longmans. 

Streightoff,  Frank  Hatch.  Standard  of  Living  Among  the 
Industrial  People  of  America.  19x1.  Houghton. 

United  States.  Labor,  Bureau  of.  Workmen's  Insurance  and 
Benefit  Funds  in  the  United  States.  1908.  Annual  Report 
of  the  Commissioner  of  Labor,  v.  23.  Chapter  VII.  State 
and   Savings   Bank  Insurance. 

United  States.  Labor,  Bureau   of.  Workmen's   Insurance  and 
Compensation  Systems  in  Europe.  2v.  1909.  Annual  Report 
of   the    Commissioner    of   Labor,   v.   24. 
Bibliography   at   the   end   of   each   chapter. 

Willoughby,     William     Franklin.     Workingmen's     Insurance. 
1898.    Crowell. 
Bibliography  pp.  379-86. 

Wisconsin.  Legislature.  Report  of  Special  Committee  on  In- 
dustrial  Insurance,  1909-10.    191 1. 

Wisconsin.  Senate.  Report  of  Committee  on  the  Practicabil- 
ity of  Government  and  State  Insurance.  1907.  Minority 
Report.    1907. 

Magazine  Articles 

American  Journal  of  Sociology.  12:  176-89.  S.  '06.  Insurance 
of  Industrial  Workingmen  as  an  Instrument  of  Tuber- 
culosis Prevention.  Arnold  C.  Klebs. 

*American  Journal  of  Sociology.  12-14:  Ja.  '07-Ja.  '09.  In- 
dustrial   Insurance.    Charles    Richmond    Henderson. 

Annals  of  the  American  Academy.  24:  331-42.  S.  '04.  Com- 
pulsory State  Insurance  of  Workingmen.   I.  M.  Rubinow. 

Annals  of  the  American  Academy.  26:  283-99.  S.  '05.  In- 
dustrial  Insurance.   F.    L.    Hofifman. 

*Annals  of  the  American  Academy.  33:  265-77.  Mr.  '09.  Logic 
of  Social   Insurance.    Charles   Richmond    Henderson. 

Annals  of  the  American  Academy.  38:  86-9.  Jl.  '11.  Neces- 
sity  for   Social    Insurance.    John    Graham    Brooks. 

Case  and  Comment.  18:  201-6;  260-2.  S.-O.  '11.  Obligatory 
Industrial    Insurance.    James    Harrington    Boyd. 


XX  BIBLIOGRAPHY 

Charities  and  the  Commons.  21:  473-6.  D.  26,  '08.  Important 

Discussions  of  Workmen's   Insurance. 
Charities   and   the    Commons.    21:   956-60.   F.    13,   '09.    Revohi- 

tion   in   Industrial   Insurance.    E:   T:    Devine. 
Charities   and   the    Commons.  21:    1203-4.   Mr.    13,    '09.   Social 

Insurance.    Charles   Richmond   Henderson. 
*Chautauquan.  41:   48-59.     Mr.  '05.   Compulsory   Insurance.   I. 

M.  Rubinow. 
Delineator,     ^y.    692.    My.    '09.    What    Industrial    Insurance 

Means.    Lee    K.    Frankel. 
Educational  Review.  23:  152-7.  F.  '02.  Compulsory  Insurance 

for   Teachers.    Edward   Manley. 
*Independent.  61:  1475-80.  D.  20,  '06.  Greatest  Life  Insurance 

Wrong.  Louis  D.  Brandeis. 
North   American   Review.    181:  921-32.   D.   '05.    Insurance   for 

Workingmen.  Frank  A.  Vanderlip. 
North  American   Review.   185:  63-8.  Ja.   '06.   State  Insurance. 

Erving  Winslow. 
*North   American   Review.    195:   630-40.   My.  '12.    Dangers   of 

State   Insurance.    Hugh    Hastings. 
Outlook.    98:    291-4.    Je.    10,    '11.    Road    to    Social    Efficiency. 

Louis  D.  Brandeis. 
Review   of   Reviews.   35:  337-9.    Mr.  '07.   Why   Not   Savings- 

Bank  Life  Insurance  for  Wage-Earners?  Louis  D.  Brand- 
eis. 
Scribner's    Magazine.    2,7'-    454-67.    Ap.    '05.    Paternalism    and 

Nationalism.    Frank    A.    Vanderlip. 
Survey.    24:    794-800.    S.    3,    '10.    Standards    of    Compensation 

for  Sickness,  Accident,  and  Death.  Sherman  C.  Kingsley. 
Survey.  Q.d:  iio-i.  Ap.  15,  '11.  Discussion  of  State  Insurance. 
Westminster  Review.  176:  379-90.  O.  '11.  State  Insurance  as 

a  Business  Proposition.  W.  R.  MacDermott. 
World  To-Day.  9:  5611-21.   D.  '04.  Billions  in  Ten-Cent  In- 
surance.  H.  W.  Lanier. 
World  To-Day.    10:    145-8.    F.   '06.   Workingmen's    Insurance. 

Charles  Richmond  Henderson. 
World  To-Day.  16:  377-88.  Ap.  '09.  Insuring  the  Masses.  Wil- 
liam J.   Graham. 


BIBLIOGRAPHY  xxi 

"World  To-Day.   21:   821-7.   Jl.   '11.    Workingmen's   Insurance. 
James    Harrington    Boyd. 
b.     Systems  of  Insurance  adopted  in  Various  Countries 

American  Economic  Association  Quarterly.  3d.  Ser.  9:  183- 
98.  Ap.  '08.  Workingmen's  Insurance  in  Illinois.  Charles 
Richmond  Henderson. 

Engineering  Magazine.  33:  105-8.  Ap.  '07.  Insurance  of  La- 
bor in    Italy   and   its   Results. 

Engineering  Magazine.  37:  997-1000.  S.  '09.  Insurance  of  La- 
bor  in   Austria. 

Engineering  Magazine.  39:  41 1-3.  Je.  '10.  Labor  Insurance 
in    the    United    States.    Miles    M.    Dawson. 

Review  of  Reviews.  44:  222-3.  Ag.  '11.  Italy's  State  Monopoly 
of   Life    Insurance. 

Yale  Review.  19:  235-54.  N.  'ro.  Problem  of  Sick  and  Acci- 
dent   Insurance    in    Switzerland.    O.    H.    Jenn3\ 

Germany 

Brooks,  John  Graham.  Compulsory  Insurance  in  Germany. 
1895.    United    States.    Lab    ■     "'•-  c    Special 

Report. 

Brooks,  John  Graham.  Report  on  German  Workingmen's 
Insurance.  National  Conference  of  Charities  and  Correc- 
tion.  Proceedings,   1905.  pp.  452-7. 

Farnam,  Henry  W.  Government  Insurance.  Operation  of 
Compulsory  Workmen's  Insurance  in  Germany.  Yale  In- 
surance   Lectures.   Ed.  2.    1909.  v.  2.    Chapters  21    and  22. 

Friedensburg,  Ferdinand.  Practical  Results  of  Workingmen's 
Insurance  in  Germany.  191 1.  Workmen's  Compensation 
Service   and    Information    Bureau. 

Germany.     Imperial     Insurance    Office.     German    Workmen's 
Insurance  as  a   Social  Institution.   5v.   1904. 
Compiled  for  the  Universal  Exposition  at  St.   Louis. 

Howard,  Earl  Dean.  Cause  and  Extent  of  the  Recent  In- 
dustrial Progress  of  Germany.  1907.  Houghton.  Work- 
ingmen's   Insurance,  pp.    131-4. 

Pinkus,   Norbert.     Workmen's   Insurance   in   Germany.      (In 


xxii  BIBLIOGRAPHY 

Commons,  J.  R.  ed.  Trade  Unionism  and  Labor  Prob- 
lems.   Chapter    26). 

Published   also  In   Yale   Review.   12:   372-88.   F.   '04. 
♦American  Journal  of  Sociology.   17:   177-87.   S.   '11.   German 

Working-men's  Insurance  and  Foreign  Countries.  Georg 
Zacher. 

Charities  and  the  Commons.  21:  368-75.  D.  5,  '08.  Populariz- 
ing  Insurance    Knowledge  in    Germany.   Lee   K.   Frankel. 

Contemporary  Review.  loi:  669-80.  My.  '12.  German  Social 
Insurance    and    Poor   Relief.   William   H.    Dawson. 

Economic  Review.  21:  309-14.  Jl.  15,  '11.  Workmen's  Insur- 
ance in  Operation:  Some  Figures  from  Germany.  Ernest 
Lesser. 

Harper's  Magazine.  119:  727-34.  O.  '09.  State  Insurance  of 
Germany.  Madge  C.  Jenison. 

North  American  Review.  179:  439-45.  S.  '04.  Workingmen's 
Insurance  in   Germany.  Fritz   Kestner. 

*Outlook.  94:  939-46.  Ap.  23,  '10.  How  Germany  Cares  for 
her  Working  People.   F.   C.  Howe. 

Quarterly  Journal  of  Economics.  24:  191-4.  N.  '09.  W^ork- 
.r'lCi^'o  1         .        -__ji>*'V'        .-.  k^rank  W.  Taussig. 

Survey.  28:  233-8.  My.  4,  '12.  Is  the  German  Industrial  In- 
surance System  a  Failure?   Randolph  T.   Brodsky. 

Yale  Review.  12:  372-88;  13:  72-97,  296-323,  418-34.  F.  '04-F. 
'05.   Workmen's    Insurance    in    Germany.    Norbert    Pinkus. 

Yale  Review.  13:  98-113.  My.  '04.  Psychology  of  German 
Workmen's   Insurance.   Henry  W.  Farnam. 

Great  Britain   and   Dependencies 

Australia.  Census  and  Statistics,  Bureau  of.  Social  Insur- 
ance.   1910. 

Lloyd-George,   David.    People's    Insurance.    191 1.    Doran. 

New  International  Yearbook,  191 1.  Under  Workingmen's 
Insurance,   Great  Britain. 

Webb,  Sidney,  and  Webb,  Beatrice.  Prevention  of  Destitu- 
tion.   1912.   Longmans.    Chapter   7.   Insurance. 

American  Political  Science  Review.  6:  229-34.  My.  '12.  Brit- 
ish   National    Insurance   Act.   W.   J.    Shepard. 


BIBLIOGRAPHY  xxiii 

American  Political  Science  Review.  6:  175-93.  My.  '12.  Gov- 
ernment Regulation  of  Insurance  in  Canada.  A.  L.  Bishop. 

Cassier's  Magazine.  32:  209-15.  Jl.  '07.  Industrial  Legislation 
in   Great  Britain,  and   its   Cost. 

Contemporary.  loi:  17-29.  Ja.  '12.  State  Insurance  Act.  P. 
Alden. 

Contemporary.  loi:  380-90.  Mr.  '12.  Social  Policy  of  the  Gov- 
ernment.  A.    G.    Gardiner. 

Independent.  61:  86-8.  JI.  12,  '06.  Government  Insurance 
in    New   Zealand.    Florence  Finch   Kelly. 

Independent.  70:  1281-2.  Je.  8,  '11.  Lloyd-George  Insurance 
Scheme. 

Nineteenth  Century.  60:  998-1002.  D.  '06.  Friendly  Societies. 
E.     Brabrook. 

Nineteenth  Century.  69:  1 141-56.  Je.  'ir.  Government  Scheme 
of  National  Insurance.  A.  C.   Roberts. 

*North  American  Review.  195:  108-19.  Ja.  '12.  Insuring  a 
Nation.    P.   J.    Lennox. 

Outlook.  99:  1036-7.  D.  30,  '11.  Lloyd-George  Insurance   Bill. 

Review  of  Reviews.  45:  194-9.  F.  '12.  Lloyd-George  and  So- 
cial Reform.  William  T.  Stead. 

Survey.  27:  1622-3.  Ja.  20,  '12.  British  Unemplojanent  and 
Health   Insurance   Law. 

II.     Industrial  Accidents  and  Workmen's  Compen- 
sation 

Books,    Pamphlets    and    Documents 

Boyd,  James  Harrington.  Workmen's  Compensation  or  In- 
surance against  Loss  of  Wages  arising  out  of  Industrial 
Accidents.  Board  of  Library  Commissioners,  Columbus, 
Ohio. 

Campbell,  Gilbert  Lewis.  Industrial  Acidents  and  Their 
Compensation.   191 1.   Houghton. 

Commons,  John  R.  Employers'  Liability  and  Accident  Insur- 
ance (in  Trade  Unionism  and  Labor  Problems,  pp.  546-73. 
1905). 


xxiv  BIBLIOGRAPHY 

Conference  of  Commissions  on  Compensation  for  Industrial 
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Clark,  Lindley  D.  Law  of  the  Employment  of  Labor.  191 1. 
Macmillan. 

Eastman,  Crystal.  Work-Accidents  and  the  Law.  1910.  Rus- 
sell  Sage   Foundation. 

Ekern,  H.  L.  Organization  of  ]\Iutual  Employers'  Liability 
Insurance  Companies.  191 1.  Wisconsin  Industrial  Com- 
mission. 

*Hard.  William  and  Others.  Injured  in  the  Course  of  Duty. 
1910.    Ridgway. 
Reprinted   from  Everjbody's   Magazine. 

Illinois.    Employers'   Liability    Commission.    Report.    1910. 

Law,  Frank  E.  State  Insurance  of  Workmen's  Compensation 
for  Accidents.  191 1.  Fidelity  and  Casualty  Company  of 
New   York. 

Lescohier,  Don  D.  Industrial  Accidents  and  Employers'  Lia- 
bility in  Minnesota.  1910.  Minnesota.  Labor,  Industries 
and  Commerce,  Bureau  of.  Biennial  Report,  v.   12,  pt.  2. 

McKittrick,  Reuben.  Accident  Insurance  for  Workingmen. 
1909.  Wisconsin.  Free  Library  Commission.  Comparative 
Legislation   Bulletin,   No.   20. 

Massachusetts.  Compensation  for  Industrial  Accidents,  Com- 
mission on.  Report.  191 1. 

Minnesota.  Employers'  Compensation  Commission.  Report. 
1911. 

National  Conference  on  Workmen's  Compensation  for  In- 
dustrial   Accidents.    Proceedings,    v.    1-3.    1909-10. 

New  Jersey.  Employers'  Liability   Commission.  Report.    191 1. 

*New  York.  Labor,  Department  of.  Bulletin.  39:  442-56.  D. 
'08.  Employers'  Liability  or  W^orkmen's  Compensation? 
L.  W.    Hatch. 

New  York.  Labor,  Department  of.  Bulletin.  40:  58-6S.  Mr. 
'09.  What  a  Republic  ]\Iay  Do  for  Its  Workingmen 
through  Accident  Insurance:  Switzerland.  Lee  K.  Frankel. 

New  York.  Legislature.  Report  by  the  Commission  Ap- 
pointed to  Inquire  into  the  Question  of  Employers'  Li- 
ability.   First   Report.  2v.   1910.   Second    Report.    191 1. 


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Ohio.  Employers'  Liability  Commission.  First  Report,  Jan- 
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Rosenfeld,  Henry  L.  Co-operation  and  Compensation  versus 
Compulsion  and  Compromise  in  Employers'  Liability; 
and  Address  Delivered  before  the  National  Association 
of  Manufacturers,  May    17,    1910. 

Schaffner,  Margaret  A.  Railway  Co-employment.  1905.  Wis- 
consin. Free  Library  Commission.  Comparative  Legisla- 
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Schwedtman,  Ferdinand  Charles,  and  Emery,  J.  A.  Accident 
Prevention  and  Relief;  an  Investigation  of  the  Subject 
in  Europe.  191 1. 

United  States.  Employers'  Liability  and  Workmen's  Com- 
pensation Commission.  Report.  1912.  Hearings,  May  10, 
1911  to  December,  1911. 

United  States.  Labor,  Bureau  of.  Bulletin.  21:  749-831.  S.  '10. 
Cost  of  Employers'  Liability  and  Workmen's  Compensa- 
tion Insurance.  Miles  IM.  Dav^^son. 

United  States.  Labor,  Bureau  of.  Bulletin.  22:  1-96.  Ja.  '11. 
Industrial  Accidents  and  Loss  of  Earning  Power:  Ger- 
man Experience   in    1897  and    1907.   Henry  J.   Harris. 

Weber,   Adna   F.    Employers'    Liability   and    Accident    Insur- 
ance. (In  Commons,  J.  R.  Ed.  Trade  Unionism  and  Labor 
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Published  also  in  Political  Science  Quarterly.  17:   256-83.  Je.  '02. 

Wisconsin.  Labor,  Bureau  of.  Biennial  Report,  v.  13-14.  1907- 
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American  Industries.  12:  25.  O.  '11.  What  Can  Employers 
Do?   F.   C.   Schwedtman. 

American  Magazine.  68:  260-2.  Jl.  '09.  Buying  a  Man's  Arm. 

Annals  of  the  American  Academy.  26:  499-574.  S.  '05.  Lia- 
bility Insurance.  W.   F.   Moore. 

Annals  of  the  American  Academy.  38:  1-317.  Jl.  '11.  Risks 
in    Modern    Industry. 

Annals  of  the  American  Academy.  38:  15-22.  Jl.  'ir.  Casualty 
Insurance  Companies  and  Employers'  Liability  Legisla- 
tion.   Edwin    W.    DeLeon. 


xxvi  BIBLIOGRAPHY 

Annals  of  the  American  Academy.  38:  78-82.  Jl.  '11.  Bur- 
den   of   Industrial   Accidents.    John    Mitchell. 

*Annals  of  the  American  Academy.  38:  159-65.  Jl-  'n.  Argu- 
ment against  Liability.   Walter  S.    Nichols. 

Annals  of  the  American  Academy.  38:  238-40.  Jl.  '11.  Work- 
men's Compensation  and  the  Industries  of  Massachusetts. 
James    A.    Lowell. 

Annals  of  the  American  Academy.  38:  241-5.  Jl.  '11.  Attitude 
of  Foreign  Countries  toward  Liability  and  Compensa- 
tion. Lee  K.  Frankel. 

*Annals  of  the  American  Academy.  38:  271-3.  Jl.  '11.  Em- 
ployers   and    Compensation   Systems.    Howell    Cheney. 

*Annals  of  the  American  Academy.  38:  263-5.  Jl-  'n-  Cost 
of  Insurance.   Miles   M.   Dawson. 

Atlantic.  103:  57-65.  Ja.  '09.  Employers'  Liability.  Frank  W. 
Lewis. 

*Century.  82:  118-22.  My.  '11.  Industrial  Indemnity.  Will 
Irwin. 

Charities  and  the  Commons.  19:  1671-82.  Mr.  7,  '08.  Em- 
ployers' Liability  in  Pennsylvania.  Crystal  Eastman. 

Charities  and  the  Commons.  21:  1143-74.  Mr.  6,  '09.  Year's 
Work  Accidents  and  Their  Cost.  Crystal   Eastman. 

Congressional  Record.  42:  7877-94.  Je.  8,  '08.  Industry  Ought 
to    Bear  the   Cost   of  All   Accidents.   George   A.    Bartlett. 

Economic    Review.    5:    297-318.    Jl.    '95.    Accident    Insurance. 

•     Henry   W.  Wolff. 

*Everybody's.  19:  522-33.  O.  '08.  Pensioners  of  Peace.  Wil- 
liam  T.    Hard. 

Harpers'  Weekly.  51:  1132.  Ag.  3.  '07.  England's  Domestic 
Upheaval    and    Its    Effects.    Sidney    Brooks. 

Independent.  64:  1340-4.  Je.  11,  '08.  Penalty  of  Progress. 
Edward   A.    Moseley. 

Independent.  70:  1417-20.  Je.  29,  '11.  Employers'  Liability. 
Chauncey    B.    Brewster. 

^Industrial  Engineering  and  the  Engineering  Digest.  7:  449- 
52.  Je.  '10.  Employers'  Liability  Insurance.  Miles  M.  Daw- 
son. 


BIBLIOGRAPHY  xxvii 

Journal  of  Political  Economy.  12:  362-81.  Je.  '04.  Labor  In- 
surance.  I.   M.   Rubinow. 

Journal  of  Political  Economy.  16:  157-9-  Mr.  '08.  Employers' 
Liability  in  Insurance  Theory.  H.  J.  Davenport. 

North  American  Review.  185:  651-60.  Jl.  '07.  Shifting  the 
Burden;  Compensation  for  Injuries.  A.  Maurice  Low. 

Outlook.  85:  508-11.  Mr.  2,  '07.  Is  Workmen's  Compensation 
Practicable?    Arthur    B.    Reeve. 

Outlook.  92:  319-22.  Je.  '09.  Hazards  of  Industry.  Launcelot 
Packer. 

Scientific   American    Supplement.   53:    22015.    My.    3,    '02.    Sci- 
entific Study  of  Accidents.  J.  Howe  Adams. 
Reprinted   from   the   Medical  Fortnightly. 

Survey.  22:  228.  My.  8,  '09.  Cost  of  German  Accident  Insur- 
ance.   Lee    K.    Frankel. 

Survey.  22:  820-1.  S.  18,  '09.  Competition  or  Co-operation 
in  Workmen's   Compensation.   George  M.   Gillette. 

Survey.  23:  336-40.  Dec.  4,  '09.  Capital  and  Labor  Agree  on 
Workmen's    Compensation.    Arthur    B.    Reeve. 

Survey.  24:  788-94.  S.  3,  '10.  Work-Accidents  and  Employers' 
Liability.    Crystal    Eastman. 
Reprinted  from  National  Conference  of  Charities  and  Corrections. 

Proceedings,    1910:    414-24. 

Survey.  26:  631-3.  Ag.  5,  '11.  National  Insurance  versus  Com- 
pensation. 

Survey.  26:  767-8.  S.  2,  '11.  Federal  Taxation  for  Industrial 
Injuries. 

*Survey.  28:  239-49.  My.  4,  '12.  After  the  Common  Law — 
What?    Symposium. 

a.     Laws   and   Court   Decisions 

For  the  texts  of  the  laws  of  individual  states,  use  the  statutes 
and  latest  session  laws.  Many  states  have  the  labor  laws,  or 
employers'  liability  laws  printed  separately.  These  may  be  ob- 
tained by  addressing  Secretaries  of  state. 

Books,  Pamphlets  and   Docmnents 

American    Economic    Association.     Bulletin.    4th    Series,     i: 
276-81.    Ap.    '11.    Compulsory    Compensation    for    Injured 
Workmen.  Daniel  L.  Cease. 
Printed    also   in    American   Labor   Legislation    Review.    1:    49-54. 

Ja.  '11. 


xxviii  BIBLIOGRAPHY 

American  Economic  Association  Bulletin.  4th   Series,  i :  282- 
95.  Ap.  '11.  Problems  of  Workmen's  Compensation  Legis- 
lation.   Thomas    L    Parkinson. 
Printed    also    in   American   Labor   Legislation    Review.    1:    55-71. 

Ap.  'IL 

American   Economic  Association.  Bulletin.  4th  Series,   i:  296- 

301.  Ap.  '11.  Voluntary  Indemnity  for  Injured  Workmen. 
F.    C.    Schwedtman. 
Printed   also    in    American    Labor   Legislation    Review.    1:    49-54. 

Ja.  '11. 

Aronson,  V.  R.  Workmen's  Compensation  Act  of  1906.  1909. 
Unwin. 

Carleton,  Frank  Tracy.  History  and  Problems  of  Organized 
Labor,  c.  191 1.  Heath.  Chapter  10.  Protective  Legisla- 
tion  for   Employees. 

Dawson,  W^illiam  Harbutt.  German  Workman.  1906.  Scrib- 
ner.    Chapter    XV.    Industrial    Insurance    Laws. 

Elliott,    A.    Workmen's    Compensation    Act    of    1906. 

Garfield,  James  R.  Employers'  Liability  and  the  Compen- 
sation Laws  and  the  Difference  Between  Them.  Ohio  Bar 
Association.    Proceedings,    1909. 

Germany.  Workmen's  Insurance  Code  of  July,  1911;  text 
translated  by  H.  J.  Harris.  United  States.  Labor,  Bureau 
of.    Bulletin.    23:    501-774.    S.    '11. 

Goodnow,  Frank  Johnson.  Social  Reform  and  the  Consti- 
tution. 191 1.  Macmillan.  Constitutionality  of  Government 
Aid  for  Pensions  in  Case  of  Old  Age,  Accident  or  Sick- 
ness,   pp.    300-17. 

International     Labor     Office.     Basel,     Switzerland.     Bulletin. 

See    this  series   for  legislation  on   employers'    liability   and   com- 
pulsory   insurance. 

Lescohier,  Don  D.  Employers'  Liability  Cases  Reported  in 
Volumes  103-109  of  the  Reports  of  the  Minnesota  Su- 
preme Court.  (In  Industrial  Accidents  and  Employers' 
Liability  in  Minnesota,  pp.  190-7.) 
Lorenz,  M.  O.  What  Form  of  Workingmen's  Accident  In- 
surance Should  Our  States  Adopt?  (In  American  Asso- 
ciation for  Labor  Legislation.  Proceedings,  1908:  59-75.) 
Montana.   Insurance   Department.   Coal   Miners'  Accident  and 


BIBLIOGRAPHY  xxix 

Total  Disability  Insurance  Law  Held  Unconstitutional, 
igii.    Bulletin,    No.    lo. 

National  Civic  Federation.  Views  of  the  Legal  Committee 
concerning  the  Effect  of  the  Decision  of  the  Court  of 
Appeals  in  the  State  of  New  York  upon  the  Compulsory- 
Compensation  Principle  in  its  Relation  to  Uniform  State 
Legislation.    191 1. 

New  York.  Court  of  Appeals.  Decision  in  the  Case  of  Earl 
Ives  vs.  the  South    Buffalo   Railway  Company,    igii. 

New  York.  Labor,  Department  of.  Bulletin.  12:  57-80.  Mr. 
'11.  Compulsory  Workmen's  Compensation  Act  Uncon- 
stitutional. 

Reeves,  William  Pember.  State  Experiments  in  Australia 
and  New  Zealand.  2v.  1902.*  Richards.  Workmen's  Com- 
pensation Laws  in  New  Zealand  and  South  Australia, 
V.    2,    pp.    21 1-6. 

Rhode  Island.  State  Library  Legislative  Reference  Bureau. 
Employers'  Liability  and  Workmen's  Compensation  Acts, 
1912.    Bulletin,   No.   5. 

United  States.  Industrial  Commission.  Report  on  the  Con- 
dition of  Foreign  Legislation  upon  IMatters  Affecting 
General  Labor.   (Report,  v.   16,   igoi.) 

United  States.  Labor,  Bureau  of.  Labor  Laws  of  the  United 
States  with  Decisions  of  Courts  Relating  Thereto.  1907. 
Annual  Report,  v.  22. 

United  States.  Labor,  Bureau  of.  Laws  Regulating  Liability 
of  Employers  for  Injuries  to  Employees;  Compilation  of 
the  Laws  of  the  States,  Territories  and  United  States. 
1908.    (6oth    Cong.    1st.    Sess.    Senate    Doc.    207.) 

United  States.  Labor,  Bureau  of.  Bulletin.  See  Numbers  as 
Issued  for  Decisions  of  Courts  Affecting  Labor. 

United  States.  Labor,  Bureau  of.  Bulletin.  10:  645-8.  Mr.  '05. 
State  Cooperative  Accident   Insurance   Fund  of  Maryland. 

United  States.  Labor,  Bureau  of.  Bulletin.  14:  574-652.  My. 
'07.    British   Workmen's    Compensation    Acts. 

United  States.  Labor,  Bureau  of.  Bulletin.  16:  1-120.  Ja.  '08. 
Legal  Liability  of  Employers  for  Injuries  to  their  Em- 
ployees  in   the    United    States.    Lindley   D.    Clark. 


XXX  BIBLIOGRAPHY 

United  States.  Labor,  Bureau  of.  Bulletin.  21:  719-48.  S.  '10. 
Summary  of  Foreign  Workmen's  Compensation  Acts. 

United  States.  Labor,  Bureau  of.  Bulletin.  22:  97-181.  Ja.  '11. 
Workmen's  Compensation  and  Insurance:  Laws  and  Bills. 

United  States.  Supreme  Court.  Opinion  and  Dissenting  Opin- 
ions on  the  Constitutionality  of  the  Employers'  Liability 
Law.    1908.    (60th    Cong,    ist    Sess.    House    Doc.    501.) 

Magazine  Articles 

*Annals  of  the  American  Academy.  38:  23-30.  Jl.  '11.  Some 
Features  of  Obligatory  Industrial  Insurance.  James  Har- 
rington   Boyd. 

Annals  of  the  American  Academy.  38:  119-27.  Jl.  '11.  Consti- 
tutional Problem  of  Workmen's  Compensation.  William 
Draper    Lewis. 

Annals  of  the  American  Academy.  38:  128-43.  Jl.  '11.  Present 
Status  of  Workmen's  Compensation  Laws.  Walter  George 
Smith. 

*Annals  of  the  American  Academy.  38:  151-8.  Jl.  '11.  Com- 
pensation Law  and  Private  Justice.  P.  Tecumseh  Sherman. 

*Annals  of  the  American  Academy.  38:  175-83.  Jl.  '11.  Sys- 
tem Best  Adapted  to  the  United  States.  Miles  M.  Dawson. 

Annals  of  the  American  Academy.  38:  184-201.  Jl.  '11.  Points 
to  be  Considered  in  Workmen's  Compensation  Legisla- 
tion. Launcelot  Packer. 

Annals  of  the  American  Academy.  38:  225-9.  Jl-  'n-  New 
Jersey   Employers'   Liability  Act.   Walter   E.    Edge. 

Charities  and  the  Commons.  19:  1191-1203.  D.  7,  '07.  Sum- 
mary of  European  Laws  on  Industrial  Insurance.  Charles 
Richmond   Henderson. 

Charities  and  the  Commons.  19:  1402-3.  Ja.  18,  'oS.  Liability 
Law   Void. 

Charities  and  the  Commons.  19:  1662-4;  20:  127-8.  Mr.  7,  Ap. 
25,  '08.  Federal  Employers'  Liability  Act.  Ernst  Freund. 

Chautauquan.  65:  305-7.  F.  '12.  British  National  Insurance 
Act. 

Congressional  Record.  42:  yg22-2,2.  Je.  8,  '08.  Speech  on  the 
Workmen's    Compensation   Act.   Adolph  J.    Sabath. 


BIBLIOGRAPHY  xxxi 

Everybody's.  19:  361-71.  S.  '08.  Law  of  the  Killed  and 
Wounded.    William    Hard. 

Journal  of  Political  Economy.  16:  109-10.  F.  '08.  Setting 
Aside    the    Employers'    Liability    Act. 

Journal  of  Political  Economy.  19:  694-700.  O.  '11.  New  York 
Workmen's  Compensation  Act  Decisions.  James  Parker 
Hall. 

Outlook.  97:  955-60.  Ap.  29,  '11.  Can  a  Free  People  be  Free? 

■Outlook.  98:  709-11.  Jl.  28,  '11.  Workmen's  Compensation 
Act:    Its   Constitutionality  Affirmed. 

Outlook.  99:  146-7.  S.  23,  '11.  Wisconsin's  Industrial  Insur- 
ance Act  to  be  Tested. 

•Quarterly  Journal  of  Economics.  19:  320-2.  F.  '05.  End  of 
the  Maryland  Workmen's  Compensation  Act.  George  E. 
Barnett. 

■Quarterly  Journal  of  Economics.  26:  275-312.  F.  '12.  British 
National   Insurance   Act.   R.   F.   Foerster. 

Survey.  23:  966-9.  Mr.  26,  '10.  Work-Accidents  and  the  Law; 
Report  of  the  New  York  Commission  on  Industrial  Ac- 
cidents. 

Survey.  24:  277-8.  My.  14,  '10.  Liability  vs.  Compensation  as 
Applied  to  Actual   Cases. 

Survey.  25:  423-4.  D.  10,  '10.  Uniform  Law  on  Accident  Com- 
pensation. 

Survey.  25:  949-62.  Mr.  4,  '11.  Compensation  Commissions;  a 
Review  of  Legislation  Proposed  in  Seven  States  with  Re- 
spect to  Work  Accidents.   P.  Tecumseh  Sherman. 

Survey.  26:  91-3.  Ap.  8,  '11.  Next  Step  in  Workmen's  Com- 
pensation.  Miles   M.   Dawson. 

Survey.  26:  185-96.  Ap.  29,  '11.  Court  of  Appeals  Decision; 
Symposium. 

*Survey.  26:  671-6.  Ag.  5,  '11.  Workmen's  Compensation. 
Would  the  Best  System  for  the  General  Welfare  be  Con- 
stitutional? Miles  M.  Dawson. 

*Survey.  27:  1015-6.  O.  21,  '11.  Washington's  "Yes"  to  New 
Y'ork's   "No." 

Survey.  27:  1091-2.  N.  4,  '11.  Olympian  Law  vs.  Albany  Law. 


xxxii  BIBLIOGRAPHY 

Survey.  27:  1306-12.  D.  2,  '11.  Struggle  for  the  British  Health 
Bill.    Randolph   J.    Brodsky. 

III.     Insurance   Plans   of  Individual  Corporations 

Books 

Phelps,  Edward  Bunnell.  Summary  of  the  Possibilities  and 
Probable  Cost  of  the  Proposed  Plan  for  Workmen's  Com- 
pensation and  Old-Age  Pensions  for  American  Brewery 
Workmen,  igii. 

Magazine  Articles 

American  Journal  of  Sociology.  13:  584-616.  Mr.  '08.  Insur- 
ance Plans  of  Railroad  Corporations.  Charles  Richmond 
Henderson. 

Annals  of  the  American  Academy.  38:  35-44.  JL  'n-  Results 
of  the  Voluntary  Relief  Plan  of  the  United  States  Steel 
Corporation.    Raynal    C.    Boiling. 

Annals  of  the  American  Academy.  38:  45-56.  Jl.  '11.  Disability 
and  Death  Compensation  for  Railway  Employees.  Daniel 
L.    Cease. 

Charities  and  the  Commons.  19:  1213-7.  D.  7,  '07.  Problem 
of  Self  Insurance  Against  Industrial  Accidents.  Edgar 
IVIaitland    Atkin. 

McClure.  35:  151-68.  Je.  '10.  Cruelties  of  Our  Courts.  John 
M.  Gitterman. 

*Survey.  24:  136-9.  Ap.  23,  "lo.  Accident  Relief  of  the  United 
States   Steel    Corporation. 

Survey.  26:  87-9.  Ap.  8,  '11.  Brewery  Workmen's  Compensa- 
tion  Fund. 

World's  Work.  14:  945-8.  O.  '07.  New  Kind  of  Insurance; 
How  One  Company  Insures  Its  Men  Against  Accidents. 
Arthur  B.  Reeve. 


BIBLIOGRAPHY  xxxiii 

IV.     Old  Age  Pensions 

Books  and  Pamphlets 

Booth,  Charles.  Old-Age   Pensions.  1899. 

Chancellor,  William  E.  Argument  for  Disability  Pensions  for 

Employees  Invalided  by  Old  Age  and  Other   Causes,  ed. 

2.    igii.    Fairfield. 
Gainsborough    Committee.    Life    and    Labour    in    Germany, 

with    an   Appendix:    Infirmity    and    Old-Age.    Pensions    in 

Germany.  London.   1907. 
Lecky,  William  Edward   Hartpole.   Qld  Age   Pensions.    1908. 

Longmans. 
Massachusetts.  Commission  of  Old-Age   Pensions,  Annuities 

and   Insurance.  Report.   1910.   (House  doc.    1400.) 

Contains  an  excellent  descriptive  account  of  existing  systems. 
National  Conference  of  Charities  and  Corrections.  1905:  445- 

57;   1906:  452-70.  Reports  of  Special  Committee  on  Work- 

ingmen's    Insurance  and   Old-Age   Pensions. 
Old  Age  Pensions;  a  Collection  of  Short   Papers.  1903.  Mac- 

millan. 
Seager,    Henry    Rogers.    Social    Insurance.    1910.    Chapter   5. 

Provision  for  Old  Age. 
Squier,    Lee    Welling.    Old    Age    Dependency    in    the    United 

States.    1912.    Macmillan. 
Sutherland,    William.    Old   Age    Pensions.    1907.    ^lethuen. 
United   States.    Labor,   Bureau   of.    Bulletin.   21:   965-1033.    N. 

'10.    Old-Age    and    Invalidity   Pension   Laws   of   Germany, 

France,   and   Australia;   Text   and   Comments. 
Vanderlip,    Frank.    Business    and    Education.    1907.    Old-Age 

Pensions  for  Workingmen.  pp.   224-52. 

Magazine  Articles  . 

Chautauquan.    61:    391-4.    F.    '11.    Helping    People    in    Their 

Homes.    S.  K.   Bolton. 
Political    Science    Quarterly.    26:    500-29.    S.   '11.    Compulsory 

Old-Age  Insurance  in  France.  I.  M.  Rubinow. 
*Quarterly   Journal   of   Economics.   24:   714-42.   Ag.   '10.    Old 


xxxiv  BIBLIOGRAPHY 

Age    Pension   Schemes:    a    Criticisim    and   a    Program.    F. 
Spencer  Baldwin. 
Review   of   Reviews.   38:   746.   State-aided   Old-Age   and    Dis- 
ability   Insurance    in    Italy. 

V.     Unemployment  Insurance 
Books 

Chapman,  S.  J.  and  Hallsworth,  H.  M.  Unemployment,  the 
Results  of  an  Investigation  made  in  Lancashire.  1909- 
Manchester  University  Press.  Chapter  8.  Seasonality  and 
Insurance. 

Dawson,  William  Harbutt.  German  Workman.  1906.  Scrib- 
ner's.    Chapter    3.    Insurance    Against    Worklessness. 

Willoughby,  William  Franklin.  Insurance  Against  Unem- 
ployment. (In  Commons,  J.  R.  ed.  Trade  Unionism  and 
Labor    Problems.    Chapter   27.) 

Magazine  Articles 

American  Journal  of  Sociology.  2:  501-14.  Ja.  '97.  Insurance 
Against   Non-Employment.   Paul   Monroe. 

^Charities  and  the  Commons.  20:  343-7.  Je.  6,  '08.  Poverty 
and  Insurance  for  the  Unemployed.  Belle  Lindner  Israels. 

Independent.  64:  647.  Mr.  19,  '08.  Insurance  Against  Unem- 
ployment. 

Independent.  67:  267-8.  Jl.  29,  '09.  Unemployment  Insurance. 

*Living  Age.  268:  443-5.  F.  18,  '11.  Insurance  Against  Un- 
employment. 

New  York.  Labor,  Department  of.  Bulletin.  40:  69-70.  IMr.  '09. 
Unemployment  Insurance  in  Denmark. 

Nineteenth  Century.  64:  762,-76.  N.  '08.  How  Switzerland 
Deals    with    her    Unemployed.    Edith    Sellers. 

Nineteenth  Century.  65:  272-82.  F.  '09.  Insurance  Against 
Unemployment  Scheme.  Edith  Sellers. 

*Scribner's  Magazine.  49:  116-20.  Ja.  '11.  Experiments  in  Ger- 
many with  Unemployment  Insurance.  Elmer  Roberts. 

Scientific  American  Supplement.  72:  394-6.  D.  16,  '11.  Insur- 
ance Against  Unemployment  in   France. 


BIBLIOGRAPHY  xxxv 

Spectator.  102:  172-3.  Ja.  30,  '09.  Insurance  Against  Unem- 
ployment. 

Spectator.  102:  806-7.  My.  22,  '09.  Compulsory  Insurance 
Against    Unemployment. 

Westminster  Review.  171:  544-51.  My.  '09.  Unemployment, 
Insurance  and  Labour  Exchanges.  T.  Good. 


SELECTED   ARTICLES    ON 
COMPULSORY  INSURANCE 


INTRODUCTION 


The  student  of  human  problems  hnds  this  subject  of  the 
protection  of  the  working  chisses  from  the  misfortunes  of 
life  the  most  human  of  all  problems.  So  large  a  proportion 
of  the  people  belong  to  the  working  classes  that  the  promo- 
tion of  their  well  being  is  one  of  the  most  imperative  so- 
cial needs.  A  country's  greatest  source  of  wealth  lies  in  its 
workers.  Upon  the  maintenance  of  the  working  people  in 
decency,  health,  comfort  and  self  respect  hangs  the  efficiency 
and  prosperity  of  a  nation. 

As  the  social  consciousness  gathers  coherence,  nations 
begin  to  ask  themselves  whether  the  wage  earners  are  being 
accorded  their  rightful  share  of  the  material  riches  resulting 
from  their  labors.  The  social  demand  is  for  healthful  and 
comfortable  homes,  nourishing  food,  suitable  clothing, 
adequate  educational  and  recreational  opportunities,  steady 
employment,  safe  and  healthful  places  in  which  to  work,  and 
wages  that  permit  provision  for  the  emergencies  of  life.  Arc 
these  requirements  being  met? 

Naturally,  the  student  looks  to  the  Old  World  for  the 
earliest  efforts  to  arrive  at  social  justice  to  the  silent  masses 
of  the  people.  Overcrowding  of  population  and  consequent 
disestablishment  of  economic  equilibrium  forced  recognition 
of  the  condition  of  the  working  people.  To  allay  the  dis- 
content growing  out   of  these  conditions   as   indexed  by  the 


2  SELECTED  ARTICLES 

rising  tide  of  socialism,  Germany,  spurred  on  by  Bismarck,, 
adopted  a  sweeping  scheme  of  social  insurance.  This  has 
been  extended  until  the  Code  of  July  19,  igii  applies  to  the 
greater  part  of  the  working  population  of  the  Empire. 
Ample  testimony  to  the  general  satisfaction  over  the  effects 
of  the  system  is  available.  Criticisms  are  not  wanting,  but 
they  refer  to  details  of  administration  rather  than  to  the  es- 
sential idea.  After  more  than  twentj'-five  years  of  trial  the 
German  systein  is  almost  universally  conceded  by  impartial 
students  to  have  been  the  leading  factor  in  the  establishment 
of  the  admitted  industrial  supremacy  of  Germany.  Briefly, 
this  system  includes  compulsory  insurance  against  industrial 
accident,  sickness,  invalidity,  old  age  and  death  of  a  wage 
earner  with  dependents. 

When  the  demands  upon  the  poor  rates  become  so  heavy 
as  to  indicate  a  reducing  of  a  shocking  proportion  of  the 
working  people  to  pauperism,  taxpayers  can  generally  be 
counted  on  to  make  some  investigations  into  causes.  Great 
Britain  has  been  slowly  and  painfully  Vv^orking  out  some 
form  of  amelioration  for  the  deplorable  conditions  existing 
among  her  working  people.  The  scheme  has  recently  (May, 
1912)  been  widened  to  include  invalidity  and  unemployment 
insurance.  Earlier  legislation  had  provided  for  workmen's 
compensation,   sickness   insurance   and   old   age  pensions. 

Many  European  countries  have  adopted  some  of  the  fea- 
tures of  the  German  system.  An  earnest  effort  to  improve 
conditions   is   manifest. 

The  laggard  in  this  type  of  reform  is  the  United  States. 
This  is  due,  principally,  to  the  handicap  to  all  social  legisla- 
tion embedded  in  the  Constitution.  Such  legislation,  except 
for  industries  engaged  in  interstate  commerce,  must  be  ob- 
tained locally  by  states.  A  number  of  states  have  modified 
the  common  law,  which  has  heretofpre  determined  employ- 
ers' liability,  and  one  state  (Washington)  has  adopted  com- 
pulsory state  insurance   for  industrial  accidents. 

Provision  for  some  of  the  contingencies  of  life  is  made 
by    some    corporations    in    the    United    States    for    their   per- 


COMPULSORY  INSURANCE  3 

manent  employees — some  of  the  systems  being  non-contribu- 
tory,  others   being  contributory  and  voluntary. 

The  great  majority  of  American  workmen  must  shift  for 
themselves  in  the  matter  of  insurance.  Some  more  equitable 
method  must  be  devised.  It  is  for  the  student  to  consider 
the  systems  in  operation,  and  discover,  if  may  be,  what  sys- 
tem is  best  adapted  to  conditions  in  the  United  States. 


SELECTED  ARTICLES 

Annals   of  the  American  Academy.  33:    265-77.   March,   1909. 

Logic   of   Social   Insurance.     Charles    Richmond    Henderson. 

Hitherto  the  title  "industrial  insurance"  in  this  country 
has  been  monopolized  by  private  companies,  and  meant 
chiefly  provision  for  funeral  expenses  at  high  cost.  It  is  time 
to  extend  the  significance  of  the  words,  or  to  adopt  some 
such  description  as  "social  insurance"  to  cover  the  methods 
of  guaranteeing  income  to  wage  earners  and  their  families 
in  case  of  sickness,  accident,  invalidism,  feebleness  of  old 
age,   death   of    the   breadwinner  and   unemployment. 

The  people  are  beginning  to  take  an  interest  in  the  sub- 
ject. A  few  years  ago  all  suggestions  were  hushed  by  the 
sneering  epithets,  "socialism,"  "sentimentalism,"  "paternal- 
ism," and  a  hint  that  one  was  corrupted  by  German  "absolu- 
tism." Of  course,  there  never  was  any  real  weight  in  such 
empty  and  provincial  phrases,  and  they  merely  indicated 
the  fact  that  the  American  mind  was  empty  of  knowledge  of 
a  world  movement.  They  revealed  an  indifference  to  human 
suffering  which  did  no  credit  to  our  civilization,  and  a  con- 
tempt for  social  science,  which  was  not  honorable  to  our 
imiversities,  editors  and  lawyers.  Very  hopeful  are  the  signs 
of  interest.  Magazine  articles  on  industrial  accidents  sell  the 
numbers;  legislative  committees  are  busy  framing  bills;  the 
Russell  Sage  Foundation  and  the  Carnegie  Institution  are 
collecting  information;  trade  unions  have  retained  legal  tal- 
ent to  help  them  formulate  laws  which  will  have  a  living 
chance  with  conservative  courts  bound  under  constitutions 
written  by  men  of  minds  alien  to  our  age  and  for  radically 
different  economic  conditions  and  ethical  ideals.  European 
nations    have    solved    the    actuarial    and    economic    problems. 


6  SELECTED  ARTICLES 

while  America,  proud  of  its  inventiveness  and  initiative,  lags 
in  the  rear  and  rails  at  the  "effete  monarchies"  of  the  Old 
World,  and  foretells  all  sorts  of  evils  like  those  senile  per- 
sons who  praise  the  times  that  are  dead. 

Perhaps  the  newspapers,  even  though  hostile,  have  helped 
to  awaken  attention  by  grudging  references  to  the  European 
laws,  while  a  corps  of  young  writers  of  talent  and  persons 
with  experience  in  charity  work  have  stirred  the  sluggish 
conscience  of  the  nation  by  their  stories  of  misery  caused 
by  our  human  neglect,  and  have  reminded  men  of  the  dis- 
closures of  the  German  workingmen's  insurance  plans  at 
the  St.  Louis  Exposition. 

One  cause  of  the  awakening  is  a  discovery  of  the  enor- 
mous cost  of  litigation  which  has  become  a  burden  upon  the 
resources  of  the  nation  and  a  disgrace  to  the  legal  profession, 
as  well  as  a  source  of  corruption.  A  recent  article  in  the 
Chicago  "Tribune"  on  "The  Cost  of  Legal  Circumlocution," 
furnishes  an  illustration: 

All  the  civil  litigation  of  England  and  Wales,  population  about 
thirty-two  millions,  is  taken  care  of  by  thirty-four  judges  In  the 
supreme  court  of  judicature  and  fifty-eight  county  judges,  or 
ninety-two  judges  in  all. 

The  population  of  Illinois  was,  by  the  census  of  1900,  approxi- 
mately 4.800,000.  Its  courts  employ  seventy-eight  circuit  judges 
and  101  county  judges  exclusive  of  Cook  County.  Cook  County  has 
twenty-five  circuit  and  superior  court  judges,  a  county  judge,  a 
probate  judge,  and  a  municipal  court  of  very  general  jurisdiction 
employing  twenty-eight  judges.  There  is  a  supreme  court  of 
seven  judges.  In  all  these  judges  number  216.  Besides,  we  have 
justices   of  the   peace  and   the  federal   judges. 

The  "Tribune"  does  not  offer  this  rough  comparison  as  con- 
clusive. But  it  suggests  that  after  making  all  due  allowances  the 
discrepancy  revealed  is  shocking.  Omitting  the  work  of  our  coun- 
ty judges  and  taking  into  account  only  that  of  our  circuit,  superior 
and  supreme  courts,  we  have  an  establishment  of  eighty-five  judges 
taking  care  of  the  civil  and  criminal  cases  of  a  population  of  less 
than  five  millions,  while  in  England  and  Wales  ninety-two  judges 
dispose  of  all  the  litigation  of  more  than  six  times  our  population. 
The  vast  property  and  business  conditions  of  England  must  also  be 
thrown  into  the  scale  against  us. 

Unless  ovu'  judges  and  our  lawyers  are  incompetent  or  worse 
there  is  something  wrong  in  our  administration  of  the  coui'ts.  The 
first  hypothesis  is,  of  course,  not  to  be  considered.  The  alternative 
should  be  faced  by  the  profession  and  by  the  public  and  reform 
achieved.  The  waste  and  burden  of  our  over-technical  procedure 
must  cease.     It  has  endured  too  long. 

Studies   of  the   causes   of  wasteful    expenditures   in   courts 

reveal   the   slow   and   serpentine    course   of   personal    damage 


COMPULSORY  INSURANCE  7 

suits  which  fill  the  dockets  and  blockade  the  roads  of  justice. 
Important  commercial  business  must  wait  while, -during  long 
years  some  mutilated  workman,  led  by  an  ambulance-chasing 
lawyer,  who  is  fed  on  hopes  of  immense  contingent  fees, 
fights  his  employer  or  a  soulless  casualty  insurance  company 
through  court  after  court,  in  the  end  to  accept  the  pittance 
which  the  attorneys  are  willing  to  leave  him  from  the  award. 

The  ideal  of  justice  is  a  prompt,  certain  and  unbought 
indemnity;  the  actual  fact  is  that  under  our  employers'  lia- 
bility laws  the  indemnity  for  injury  in  occupation  is  subject 
to  all  the  uncertainties  of  gambling,  it  comes,  if  ever,  after 
long  and  painful  waiting,  and  it  is  robbed  of  its  value  by  the 
necessary  costs  of  collection  through  the  courts.  There  is  no 
greater  source  of  hatred  for  law  and  judicial  process  than 
this  travesty  and  mockery  of  justice.  The  abuses  of  injunc- 
tions in  case  of  strikes  and  boycotts  are  comparatively  rare 
and  easily  remedied;  the  wrongs  legally  perpetrated  in  dam- 
age suits  are  a  matter  of  universal  and  daily  experience.  As 
soon  as  a  workman  is  injured  and  claims  his  indemnity  in 
courts  his  employer  may  put  him  on  a  black  list  and  perse- 
cute liim  to  death;  and  the  very  nature  of  the  law  produces 
this  artificial  and  monstrous  antagonism.  Lawlessness  and 
class  hatred  are  the  legitimate  progeny  of  a  procedure  which 
has  been  rejected  by  every   other  great  and  civilized  people. 

Curious  and  discouraging  is  the  consequence  of  living  for 
generations  under  such  an  unfit  law;  it  has  shaped  our  modes 
of  reasoning  until  we  cannot  think  rationally  on  the  actual 
demands  of  the  situation.  We  follow  precedents  of  the  past 
for  a  guide  in  a  new  and  different  economic  world,  and  every 
step  takes  us  further  from  our  goal.  Not  only  lawyers  and 
judges,  but  aggressive  business  men  and  shrewd  trade  union- 
ists think  in  terms  set  by  antiquated  regulations.  Trade 
unions  are  spending  their  energy  on  making  the  employers' 
liability  law  still  more  drastic  and  until  recently,  they  have 
not  faced  the  fact  that  progress  in  this  direction  is  impos- 
sible. What  they  need  is  insurance  of  income  in  all  cases 
of  accident,  whether  from  negligence  of  employer  or  from 
risk   of   the    trade.      What   they   want   and   ask   is   the   chance 


,8.  SELECTED  ARTICLES 

to  punish  their  emploj-ers  in  case  of  negligence  only,  and 
they  are  seeking  to  interpret  "negligence"  in  a  sense  which 
it  never  had  before,  which  is  unjust  now,  and  which  will  pro- 
voke still  more  conflict  in  the  courts. 

Meantime,  more  by  a  reflex  movement  of  discomfort  than 
from  scientific  guidance,  employers  and  employees  are  per- 
forming all  sorts  of  experiments  with  insurance.  Blind  and 
faulty  as  those  gropings  are,  they  must  be  made  the  starting 
point  for  a  scientific  and  complete  system  in  the  future,  as 
acorns  produce   oaks. 

The  principle  of  association  for  mutual  protection  in  the 
emergencies  of  existence  manifest  itself  in  the  clubs  and  lo- 
cal benefit  societies  which  are  formed  everywhere  in  the 
country.  The  negroes  of  the  South  have  been  led  by  the  in- 
stinct of  aggregation  and  the  example  of  their  white  neigh- 
bors to  pool  their  dues  against  the  time  of  the  funeral. 
Sometimes  the  undertaker  is  also  secretary-treasurer  of  the 
pool,  with  results  very  similar  to  those  known  in  the  case 
of  burial  insurance  benefits. 

The  statistics  of  funds  collected  bj^  these  friendly  groups 
on  the  basis  of  common  occupation,  race  or  religious  ties,  or 
mere  neighborhood,  will  never  be  gathered;  but  even  partial 
surveys  show  vast  sums  and  reveal  heroic  sacrifice  and  deeds 
of  friendly  service.  The  German  imperial  legislators  have 
been  wise  enough  to  retain  these  features  of  local  and  per- 
sonal moral  bonds  in  their  sickness  insurance  laws.  In  con- 
nection with  illness  something  more  is  needed  than  mere 
money  benefits;  a  human  touch  of  sympathy  must  be  added 
by  fraternal  visitors;  and  intimate  acquaintance  diminishes 
the  temptation  to  malingering  almost  as  thoroughly  as  med- 
ical examinations. 

The  fraternal  societies,  of  national  scope  and  with  local 
lodges,  all  federated  in  the  common  interest,  have,  with  slow 
and  irregular  march,  educated  millions  of  people  in  the  ele- 
mentary principles  of  social  insurance.  It  is  true  these  so- 
cieties include  many  representatives  of  the  commercial  and 
professional  classes,  but  they  are  also  popular  with  many 
groups  of  workingmen.     They  have  demonstrated  the   possi- 


COMPULSORY  INSURANCE  9 

bilities  of  economy  of  administration  where  the  ties  of  per- 
sonal association  are  strong  through  neighborly  feeling, 
mystic  symbols  and  religious  faith.  The  Mutualists  of 
France  have  shown  that  not  only  sickness  insurance  and 
death  benefits  but  also  old  age  pensions  can  be  provided  by 
this  method — with  proper  governmental  supervision  and  aid. 

Some  of  the  trade  unions  have  added  insurance  features 
of  various  kinds,  and  when  members  have  good  wages  these 
have  succeeded  fairly  well  with  sickness  and  burial  benefit. 
The  trade  unions  alone  have  achieved  even  a  moderate  suc- 
cess with  unemploj'nient  benefits.  They  have  failed  to  in- 
sure the  workmen  who  are  on  low  and  uncertain  income. 
When  a  system  of  compulsory  accident  insurance  has-  been 
organized  the  trade  unions  will  be  free  to  provide  sickness 
and  invalid  insurance  and  additional  income  beyond  the  min- 
imum which  can  be  secured  by  law;  but  they  can  never  fur- 
nish adequate  accident  insurance,  and  society  has  no  right 
to  require  them  to  carry  a  risk  which  is  part  of  the  real  cost 
of  production  and  should  be  borne  wholly  as  part  of  the  ex- 
penditures   of   production. 

One  principle  has  been  taught  to  millions  of  persons  bj^  all 
these  schemes  of  insurance — the  principle  of  insurance  as 
opposed  to  savings.  The  obsolescent  doctrines  of  individual- 
ism and  laissezfaire  idolized  the  savings  bank  and  the  multi- 
tudes actually  believed  that  by  deposits  of  an  average  of  one 
hundred  dollars  a  year  at  3  per  cent  they  could  all  become 
capitalist  managers  and  gain  a  share  in  the  profit  funds. 
This  illusion  was  cultivated  for  a  long  time  by  advocates 
of  many  ill-defined  "profit-sharing"  schemes.  Of  course, 
there  was  a  large  measure  of  truth  in  both  these  ideas,  and 
much  wnll  still  be  made  of  them  in  the  future.  But  hope  of 
"rising"  into  the  diminishing  capitalist-manager  class  has 
been  definitely  abandoned  by  workingmen  and  people  on 
salaries.  Attention  is  turned  to  the  value  of  association  and 
insurance.  The  minvite  a  man  joins  an  insurance  society  he 
gains  a  claim  on  a  fund  which  he  could  not  "save"  in  twenty 
years.     Furthermore,  men   are  discovering  that  co-operation 


lo  SELECTED  ARTICLES 

with  others  opens  a  finer  way  of  life  than  depositing  pre- 
miums to  an  individual  account. 

From  the  point  of  view  of  social  insurance  the  tendency 
to  concentrate  manufactures,  commerce  and  transportation 
in  permanent  corporations  is  an  advantage;  partly  because 
the  responsible  managers  of  large  enterprises  must  be  far- 
seeing  men,  and  partly  because  solid  corporations  can  safely 
venture  on  schemes  which  require  a  long  view  and  the  ac- 
cumulation of  funds.  It  is  precisely  with  the  railway  com- 
panies and  the  other  huge  corporations  that  we  find  the  most 
rapid  development  of  workingmen's  benefit  and  pension 
plans.  It  seems  probable  that  these  bodies  will  entrench 
themselves  in  their  financial  position  by  these  means,  because 
they  will  draw  away  from  the  less  important  managers  their 
best  workmen  and  hold  them  in  their  service  with  the  pros- 
pect of  serene  and  independent  old  age.  These  plans  are 
developing  so  rapidly  that  statistics  are  soon  obsolete,  and 
there  is  scarcely  a  good  manufacturing  or  transportation 
company  which  is  not  employing  legal  and  actuarial  talent 
to  recommend  methods  and  legislation.  To  this  course  they 
are  driven  all  the  more  by  the  tendency  of  legislatures  to 
lay  upon  corporations,  creations  of  the  state,  burdens  of  lia- 
bility which  they  do  not  think  of  imposing  on  private  em- 
ployers. The  consequence  is  that  the  directors  of  large  en- 
terprises are  looking  about  for  a  method  which  will  at  once 
conciliate  emploj-ees  and  avoid  the  waste  of  litigation  in 
damage  suits.  As  progress  comes  b}'  common  imitation  of 
examples  set  by  princes  and  men  in  high  place,  we  may  rea- 
sonably look  for  a  movement  of  smaller  employers  to  se- 
cure the  advantages  of  assembled  capital  through  national 
insurance  associations  which  will  either  furnish  workmen's 
collective  policies  or  arrange  for  better  terms  with  casualtj'^ 
companies. 

No  voluntary  system  of  social  insurance  can  be  economi- 
cally administered,  save  upon  a  foundation  of  compulsory  in- 
surance. The  reason  is  obvious  and  all  the  schemes  men- 
tioned illustrate  the  law.  So  long  as  accident  insurance  con- 
tinues  to   be    optional,    many   employers    and    emploj-ees   will 


CO^[PULSORV  IXSURANCE  jj 

neglect  organization  and  they  will  hamper  or  even  defeat 
those  who  are  willing   to   organize. 

Part  of  the  difficulty  in  the  United  States  is  created  by  the 
existing  law.  Employers  feel  that  they  cannot  afford  to 
support  accident  insurance  at  their  own  cost  so  long  as  they 
are  liable  to  pay  heavy  damages  to  injured  workmen  or  tight 
them  in  the  courts;  and  the  law  keeps  them  always  in  fight- 
ing mood.  So  long  as  part  of  the  employers  refuse  to  carry 
these  extra  premiums  their  competitors  are  economically 
compelled   to   follow   their  example. 

A  compulsory  insurance  law  would  at  one  stroke  of  the 
pen  remove  the  burden  created  by  the  present  liability  for 
negligence  and  the  appalling  wastes  in  casualty  company 
fees  and  litigation;  and  at  the  same  time  the  amount  now 
wasted  or  misdirected  would  be  available  for  an  accident  and 
sickness  insurance  fund  of  vast  magnitude.  At  present  an 
enormous  sum  is  spent  for  soliciting  business  and  settling 
claims  by  agents  of  casualt}'  companies.  This  is  all  waste, 
because  under  compulsory  insurance  employers  would  seek 
the  means  of  meeting  their  responsibilities  and  their  protec- 
tion could  be  "sold  over  the  counter."  The  managers  of  in- 
dustries could  then  choose  between  the  bids  of  casualty  com- 
panies for  workmen's  collective  policies,  or  organize  their 
own  mutual  insurance  associations.  The  premiums  would 
fall  to  a  legitimate  rate  and  stockholders  in  casualty  com- 
panies would  no  longer  draw  dividends  from  extortion,  strife 
and  blood  inonej-. 

That  which  is  economically  necessary  and  otherwise  so- 
cially imperative  will  ultimately  be  found  constitutional.  In 
all  our  history  there  has  been  no  exception  to  this  rule;  al- 
though at  every  step  into  a  brighter  world  judges  have 
solemnly  denied  the  possibility  and  great  lawyers  have  turned 
back  to  their  case  books  with  a  smile  of  pity  for  the  phi- 
lanthropists or  bitter  sarcasm  for  the  agitators  who  ruffled 
the  calm  sea  of  their  complacent  confidence  in  "natural  law,'' 
Coke,  Blackstone  and  Company. 

Within  the  past  year  the  federal  government  itself  has 
broken   up    the    "crust   of  custom"    l)y   enacting   a   law   which 


12  SELECTED  ARTICLES 

provides  compensation  for  certain  classes  of  its  own  em- 
ployees injured  in  the  service;  and  the  pitifully  inadequate 
compensation  will  be  increased  and  extended.  It  is  a  splen- 
did and  persuasive  example  of  justice  which  the  general  gov- 
ernment has  set  before  the  several  states  and  all  employers  of 
labor.  The  document  is  a  light  tower  showing  the  future  high- 
way for  all  those  who  control  the  services  of  men  who  must 
live  daj'^  by  day  on  daily  income. 

The  assertion,  based  on  nothing,  that  compulsory  social 
insurance  is  '"not  American"  is  contrary  to  the  most  obvious 
facts  of  our  history.  We  are  a  law-abiding  people  and  love 
to  make  laws,  and  everj^  statute  and  court  ruling  is  compul- 
sory. We  are  so  used  to  compulsion  in  the  common 
interest  that  we  forget  it,  as  we  are  unconscious  of  the  at- 
mosphere. It  is  the  vital  element  in  which  we  enjoy  freedom, 
security,  order  and  opportunity.  By  compulsory  laws  we 
build  and  maintain  roads  and  bridges,  against  the  mean  pro- 
tests of  the  minority  who  would  be  content  to  stick  in  the 
mud.  By  compulsory  laws  we  secure  parks  and  pleasure 
grounds  and  secure  the  revenue  by  diverting  money  from  the 
liquor  traffic.  Within  the  memory  of  the  writer  in  the  Mid- 
dle West  a  large  if  not  respectable  minority  railed  at  the 
public  school  laws  as  robbery,  and  insisted  that  any  man  had 
the  right  to  bring  up  his  offspring  in  brutish  ignorance  if 
he  wished  to  do  so. 

Compulsory  taxation  to  relieve  the  poor,  the  insane,  the 
idiotic,  the  demented,  the  indigent  old  people  is  in  the  poor 
law  of  Great  Britain,  and  the  nations  descended  from  it; 
while  republican  France  has  recently  adopted  the  principle 
and  Italy  is  moving  in  the  same  direction.  This  means  that 
the  conscience  of  a  modern  nation  will  not  permit  a  citizen, 
however  inefficient  or  unworthy,  to  perish  without  an  offer 
of  at  least  a  minimum   supply  of  the  necessities  of  life. 

We  shall  be  logical.  We  shall  discover  that  it  is  morally 
infamous  to  offer  temporary  asylum  and  a  secure  old  age 
to  wornout  criminals,  prostitutes,  ignorant  ne'er-do-wells, 
and  degenerates,  and  deny  shelter  to  honest  workmen,  ex- 
cept on  terms  revolting  and  debasing. 


COMPULSORY  INSURANCE  13 

The  popular  campaign  against  tuberculosis  has  revealed 
to  the  common  mind  the  meaning  of  the  "police  power"  of 
the  state,  and  the  significance  of  public  health  administration. 
No  man  can  be  sick  unto  himself,  especially  in  a  crowded 
factory  or  tenement  house.  Those  who  are  too  ignorant, 
poor  or  negligent  to  keep  well  are  taken  in  hands  by  the 
commissioner  of  health.  Those  who  suiifer  from  infectious 
diseases  are  isolated  in  special  hospitals  or  warning  bulletins 
are  posted'at  the  front  door.  It  is  notorious  that  people  on 
low  incomes  go  to  physicians  and  dispensaries  only  in  the 
last  resort,  from  fear  of  expenses  their  income  cannot  meet. 
Society  is  discovering  that  neglected  disease  or  wounds  in- 
volve public  loss  and  danger.  How  can  we  secure  prompt 
and  economic  application  to  the  medical  profession  without 
pauper  relief?  The  answer  comes  from  Germany:  by  com- 
pulsory and  universal  sickness  insurance.  There  is  no  other 
answer. 

This  is  part  of  our  reply  to  those  who  declaim  against 
workingmen's  insurance  as  "class  legislation."  It  is  not  class 
legislation;  it  is  ''social  insurance,"  because  all  members  of 
society  reap  its  advantages,  just  as  rich  men  who  send  their 
children  to  private  schools  derive  benefits  from  the  public 
schools  which  educate  the  poorer  neighbor.  If  an  insured 
workman  is  injured  he  places  himself  instantly  under  expert 
medical  advice,  and  is  more  surely  and  speedily  restored  to 
industrial  efificiency,  and  so  becomes  again  a  producer  of  so- 
cial  wealth. 

Some  of  the  individualists  oppose  compulsory  insurance 
because  it  will  "pauperize"  wage  earners.  But  neglected  sick- 
ness is  the  broad  and  easy  descent  to  pauperism,  and  it  is 
by  this  route  most  paupers  travel  to  their  doom.  Compulsory 
insurance  is  the  best  public  health  measure  yet  organized. 

Has  anyone  investigated  the  cost  and  moral  degradation 
caused  by  the  non-payment  of  medical  service?  It  is  no- 
torious that  physicians  annually  contribute  millions  of  dollars 
to  patients  who  will  not  or  cannot  pay;  but  this  is  a  com- 
pulsory tax  on  physicians,  not  always  a  cheerful  philanthropy. 
Physicians  cannot  refuse  the  call  of  a  wounded   or  sick  citi- 


14  SELECTED  ARTICLES 

zen  and  cannot  require  advanced  paj'ments,  as  landlords  and 
grocers  can.  Pul)lic  opinion  and  the  ethics  of  their  pro- 
fession require  them  to  rise  in  the  night  and  go  through 
storms  to  help  those  who  suffer,  and  this  without  hope  of 
payment. 

This  is  unscientific  and  barbarous.  Most  of  it  is  wholly 
unnecessary.  Physicians  should  have  a  social  guarantee  of 
payment,  and  honest  men  should  not  be  obliged  to  pay  for 
the  dead  beats.  Under  a  compulsory  insurance  law  a  fund 
for  paying  ph3'sicians  and  supporting  hospitals  would  be 
provided  in  advance  and  the  cost  would  be  equitably  distrib- 
uted. Several  methods  of  providing  the  funds  of  social  in- 
surance are  now  under  discussion  and  all  of  them  have  a 
chance  of  being  put  to  the  test  of  experiment,  the  final 
arbiter.  We  have  already  paid  our  compliments  to  the  ex- 
isting liability  law  based  on  the  principle  of  tort,  and  we  have 
found  it  condemned  by  every  modern  nation  except  our  own, 
and  even  here  admitted  to  be  full  of  cruelty  and  waste. 

Massachusetts  has  passed  a  law  (May,  1908)  permitting 
employers  to  escape  from  the  existing  liability  on  condition 
that  they  adequately  insure  their  employees — the  principle 
embodied  in  the  bill  offered  for  educational  purposes  in  1907 
by  the  Illinois  Industrial  Insurance  Commission  and  op- 
posed by  the  trade  unions.  L'p  to  the  time  of  writing  this 
article,  not  a  single  employer  in  Massachusetts  had  thought 
it  worth  while  to  avail  himself  of  this  permissive  law,  and 
there  is  no  reason  in  the  nature  of  the  case  for  hoping  for 
any   general   acceptance   of  the   idea. 

The  delegates  to  the  International  Congress  on  Social  In- 
surance in  igo8  were  unanimously  agreed  that  a  minimum 
insurance  can  never  in  au}-  country  be  secured  to  workmen 
without  legal  compulsion.  This  conclusion  is  the  result  of 
more  than  a  century  of  trial  of  all  forms  of  voluntary  in- 
surance. Two  schemes  of  compulsory  law  are  now  debated 
in  this  country,  the  British  compensation  law,  and  compul- 
sory insurance.  The  compensation  method  is  urged  for  the 
United  States  because  it  is  English.  But  the  British  act  is 
itself  a  pioneer  experiment;  and,  heretofore,  as  in  the  case  of 


COMPULSORY  INSURANCE  15 

the  poor  laws  and  employers'  liabilitj^  laws,  we  have  imi- 
tated England  after  that  nation  had  abandoned  an  nntenahle 
position.  The  compensation  law  has  difficulties  which  do  not 
inhere  in  insurance  plants.  Thus,  if  all  employers  are  made 
liable  to  pay  compensation  in  any  case  of  injury,  the  pay- 
ment would  be  ruinous  to  farmers  and  small  manufacturers. 
It  is  reported  that  in  England  this  is  so  true  that  the  com- 
pensation act  is  a  dead  letter  among  the  petty  manufacturers 
and   farmers. 

But  if  the  employees  are  required  to  paj'  a  periodical 
premium  of  a  small  percentage  of  the  wage  rate,  this  would 
be  made  a  part  of  the  ordinary  expense  of  business,  and 
could  be  met  by  any  householder,  or  any  employer  of  work- 
men in  shop  or  field.  Our  people  are  already  familiar  with 
the  insurance  principle,  they  have 'had  the  patient  and  genial 
instruction  of  life  insurance  agents,  the  most  skilful  and 
efifective  teachers  of  a  great  social  principle  whose  services 
are  not  always  treated  with  the  reverence  and  gratitude  they 
deserve  in  view  of  the  results.  With  the  principle  of  com- 
pensation we  have  no  acquaintance  unless  the  obnoxious 
law  of  liability  for  negligence  may  be  so  regarded,  and  that 
is  now  so  associated  with  fraud,  injustice  and  waste  that  it 
repels. 

Compensation  laws  are  an  indirect  method  of  compelling 
employees  to  insure,  when  the  direct  way  would  be  more 
simple,  open,  fair  and  economical.  Compensation  laws  leave 
the  thriftless  and  irresponsible  employers  uninsured  to  com- 
pete with  employers  who  do  insure,  to  the  disadvantage  of 
the  more  competent,  at  the  same  time  leaving  their  own 
employees  without  protection.  Under  a  straight  and  direct 
insurance  law  all  employers  are  on  a  level  and  all  employees 
are   secure   of  protection. 

Furthermore,  under  a  compulsor}^  compensation  law.  if 
it  stand  alone,  the  'state  leaves  the  employers,  especially  the 
small  employers,  at  the  mercy  of  casualty  companies  without 
an  alternative.  It  does  not  seem  to  the  writer  fair  or  safe 
to  compel  many  thousands  of  employers  to  carry  a  liability 
to  pay  heavy  indemnities  in  case  of  accident  or  other  injury 


l6  SELECTED  ARTICLES 

without  ample  and  well  organized  methods  of  distributing 
and  providing  for  the  risk  by  some  insurance  method.  The 
state  itself  need  not  go  into  the  insurance  business.  It 
should  leave  a  perfectly  free  field  for  casualty  companies. 
But  the  state  should  provide  for  the  organization  of  mutual 
insurance  associations  of  employers  and  for  a  certain  fund 
of  deposit  which  would  relieve  the  individual  employer  from 
enormous  liabilities,  protect  the  employees  beyond  a  doubt, 
and  provide  wholesome  competition  with  private  insurance 
companies  conducting  business  for  profit.  Advocates  of  the 
British  compensation  law  are  under  moral  obligations  to 
remember  its  limitations.  It  bears  the  historic  marks  of  its 
recent  birth  from  the  principle  of  tort  on  which  the  employ- 
ers' liability  law  is  based;  it  provides  indemnity  for  injuries 
from  accident  and  disease,  only  so  far  as  these  arise  directly 
out  of  the  employment.  But  many  injuries  to  health  and 
soundness  of  body  arise  out  of  conditions  quite  apart  from 
the  occupation  and  place  of  employment,  and  for  these  al- 
so workmen  need  such  protection  as  they  can  find  only 
under   a    compulsory    insurance    system. 

The  fear  is  often  expressed  that  if  workmen  are  insured 
against  accidents  malingering  will  be  introduced;  men  will 
claim  benefits  on  slight  pretexts  in  order  to  enjoy  a  vaca- 
tion. The  apparent  increase  of  slight  injuries  in  Germany 
is  cited  in  proof.  The  argument  has  little  weight.  Men 
instinctively  avoid  pain  and  mutilation;  benefits  never  equal 
wages;  medical  certificates  can  reduce  the  evil;  and,  real 
as  the  danger  is,  it  is  not  to  be  weighed  against  the  well- 
known  miseries  of  the  present  situation.  Besides,  malinger- 
ing is  already  a  familiar  fact  in  this  country;  the  trade 
unions  and  fraternal  societies  have  plans  for  overcoming 
it.  Under  our  employers'  liability  laws  the  workmen  very 
frequently  threaten  damage  suits  without  legal  ground  in 
order  to  extort  payments  for  injuries  not  due  to  employers' 
negligence.  If  a  careful  investigation  were  made  and  sta- 
tistics secured  it  would  show  that  Germany  has  no  monop- 
oly of  malingering.  The  uncertainty  of  risk  under  our  law 
is   not  merelv   the   occasion  of  enormous   costs  for  casualty 


COMPULSORY  IXSURAN'CE  17 

insurance  premiums,  but,  since  the  limit  of  practicable  in- 
surance is  $5,000,  and  damages  of  $20,000  to  $30,000  are  not 
unknown,  the  entire  risk  is  not  covered  by  insurance  policies. 
This  compels  certain  employers  to  pay  higher  interest  for 
capital  required  in  their  business  to  cover  the  extra  risk, 
and  this  is  in  addition  to  the  loss  occasioned  by  attendance 
on  lawsuits  and  payments  to  workmen  outside  the  award. 

Doctor  Zacher,  in  a  review  of  the  discussions  of  the  In- 
ternational Workingmen's  Congress  at  Rome,  in  October, 
1908,  has  selected  the  chief  points  on  which  after  years  of 
heated  discussion  all  parties  seemed  to  be  united.  The 
delegates  to  this  congress  from  England  and  France  have 
stood  for  the  principle  of  freedom  and  for  voluntary  organ- 
izations. Especially  in  P'rance  the  "jNIutualists"  have  long 
contested  the  tendency  to  break  up  their  fraternal  organiza- 
tions and  give  to  the  state  a  monopoly  in  this  sphere.  Nat- 
urally, the  casualty  companies  have  been  unwilling  to  be 
driven  out  of  the  field  of  accident  and  health  insurance  by 
the  compulsory  laws  of  the  state.  At  Rome  all  these  parties 
united  upon  the  principle  that  compulsory  insurance  is  abso- 
lutely necessary  to  secure  a  iiiinimuDi  income  for  working 
men  in  case  of  accident,  sickness  and  invalidism. 

Luzzatti,  formerly  Italian  Minister  of  Finance,  con- 
fessed himself  a  convert  to  the  principle  of  compulsion  be- 
cause he  had  found  that  the  most  earnest  efforts  of  the 
Italians  to  secure  the  great  multitude  of  workers  from 
pauperism  on  the  voluntary  principle  had  failed.  Even  with 
the  help  of  a  state  subsidy  the  voluntarj'  associations  had 
been  able  to  insure  only  200,000  persons,  and  most  of  those 
connected  with  the  state  employments,  out  of  12,000,000  per- 
sons who  under  a  compulsory  law  would  have  been  insured. 
Therefore,  he  was  of  the  conviction  that  without  legislative 
compulsion  the  purpose  of  insurance  cannot  be  reached.  As 
compulsory  school  education  was  a  necessity  for  the  intel- 
lectual education  of  the  masses,  so  compulsory  insurance 
was  necessary  for  their  economic  education.  The  fear  that 
compulsory  insurance  would  hinder  the  development  of  the 
free  activities  of  associations  had  been  allayed  b}-  the  aston- 


i8  SELECTED  ARTICLES 

ishing  successes  of  Germany.  And  in  France,  Mabilleau,  the 
leader  of  the  French  Mutualists,  had  reached  the  conclusion 
that  without  legal  compulsion  the  societies  of  mutual  benefit 
could  not  be  successful  in  the  field  of  sickness  and  invalid  in- 
surance. Luzzatti  made  a  suggestion  which  seemed  to  be 
accepted  by  all,  that  compulsory  insurance  offers  only  the 
indispensable  minimum  income;  while  in  order  to  advance  to 
the  maximum  voluntary  insurance  must  be  brought  to  bear. 
Between  these  two  poles  the  free  initiative  of  the  individual 
and  the  autonomy  of  voluntary  organizations  had  a  wide  field 
for  action. 

The  congress  at  Rome  discussed  also  the  important  mat- 
ter of  education  and  training  of  expert  officers  for  insurance 
organizations.  This  is  a  matter  which  must  receive  attention 
in  the  universities  of  the  United  States.  We  have  naturally 
given  more  attention  to  life  and  fire  insurance  because  thought 
on  these  matters  was  better  systematized  and  because 
material  for  study  was  near  at  hand.  But  already  our  great 
corporations  have  begun  to  introduce  the  voluntary  associa- 
tions of  insurance  and  legislatures  are  asking  for  information, 
and  very  soon  there  will  be  a  considerable  demand  for  per- 
sons thoroughly  trained  in  the  scientific  aspects  of  working- 
men's  insurance  in  all  its  branches.  In  this  connection  too 
great  emphasis  cannot  be  laid  upon  the  importance  of  teach- 
ing the  medical  students  their  duties  in  relation  to  the  differ- 
ent schemes  of  insurance.  The  medical  profession  will  be 
called  upon  more  and  more  to  administer  the  various  schemes 
of  accident  and  invalid  insurance,  and  there  are  many  techni- 
cal questions  of  great  interest  with  which  they  ought  to  be 
familiar  in  addition  to  their  purely  professional  duties. 
Courses  of  instruction  in  social  insurance  should,  therefore, 
speedily  be  added  to  the  curriculum  of  our  medical  students. 
The  field  of  industrial  diseases  alone  demands  much  larger 
'attention  than  it  has  hitherto  received  from  the  medical  pro- 
fession in  this  country,  and  only  the  physicians  have  the 
knowledge  which  will  enable  them  to  act  as  inspectors  for 
insurance  agencies.  The  staff  of  factory  inspectors  should 
include  men  and  women  of  suitable  medical  training. 


COMPULSORY  IXSURAXCK  19 

The  international  congress  has  given  considerable  discus- 
sion to  the  insurance  of  mothers,  and  it  is  apparent  that  in 
our  industrial  cities  provision  must  be  made  for  those  women 
who  have  the  double  care  of  infant  life  and  of  earning  means 
to  support  the  family.  It  is  not  too  much  to  say  that  de- 
generation in  large  groups  of  modern  city  dwellers  is  one  of 
the  serious  problems  of  our  time.  Unemployment  insurance 
will  not  be  touched  upon  here.  Hitherto  the  United  States 
have  been  very  scantily  represented  in  this  international 
movement,  but  measures  were  taken  at  the  last  congress  for 
organizing  an  American  committee. 

Compulsory  compensation  or  insurance  is  an  inevitable 
and  certain  result  of  measures  already  taken  by  leading  em- 
ployers. The  greatest  managers  have  already  entered  seri- 
ously upon  a  policy  of  insurance  in  some  form,  though  ever 
so  inadequate  and  crude;  and  every  manager  who  assumes 
financial  burdens  in  this  direction  finds  his  pecuniary  interest 
threatened  by  those  less  intelligent,  progressive  and  humane. 
What  must  be  the  efifect?  The  only  means  of  equalizing 
the  burden  is  by  legislation  compelling  all  employers  to  bear 
the  same  load,  and  preventing  the  meanest  and  most  narrow- 
minded  from  deriving  an  advantage  over  the  best  employees. 
Therefore,  every  voluntary  scheme  which  is  introduced 
brings  one  more  powerful  ally  to  the  cause  of  compulsory  in- 
surance. 

Annals  of  the  American  Academy.  38:  23-30.  July,  191 1. 

Some     Features     of     Obligatory      Industrial      Insurance. 

James    Harrington    Boyd. 

The  legislatures  of  fourteen  states  have  passed  statutes 
abolishing  the  fellow-servant  rule.'  Seven  or  more  of  the 
states  have  modified  one  or  more  of  the  common  law  de- 
fenses,   either    by    statute    or    by    decision    of    their    courts, 


^Arkansas,  Colorado,  Florida,  Georgia  (1885),  Iowa,  Kansas,  Min- 
nesota, Montana,  Nebraska,  Nevada,  North  Carolina,  Oklahoma, 
South  Dakota  and  IMissouri. 


20  SELECTED  ARTICLES 

along  the  following  lines:'  (i)  Adopting  the  doctrine  of 
comparative  negligence,  which  has  always  been  the  rule  and 
common  law  in  certain  states,  like  Georgia  and  in  admiralty 
causes  in  the  federal  courts;  (2)  changing  the  burden  of 
proof  of  contributory  negligence  from  the  plaintiff  to  the  de- 
fendant (as  has  always  been  the  rule  in  the  federal  court 
and  some  states),  as  for  example,  in  Ohio  and  Oregon; 
(3)  taking  away  the  defense  of  assumption  of  risk  when  the 
risk  assumed  was  caused  by  the  fault  or  negligence  of  the 
employer. 

The  tendency  of  the  development  of  the  statutory  law 
during  the  last  few  years,  relative  to  the  recovery  of  com- 
pensation for  injuries  to  workingmen  which  arise  out  of 
their  employment,  is  to  wipe  out  the  common  law  defenses, 
leaving  the  action  based  solel}'  upon  the  fault  of  the  em- 
ployer. 

The  chief  sources  of  the  friction  between  emploj^er  and 
emploj'e,  the  rapid  increase  in  the  demands  for  charitable 
relief  and  care  for  delinquent  children,  and  the  correspond- 
ing demand  for  compensation  for  all  personal  injuries  which 
workingmen  receive  in  the  due  course  of  their  employment, 
continue  to  exist  largely  because  compensation  for  injuries 
can  only  be  obtained  when  the  employe  can  prove  fault  on 
the  part  of  his  employer. 

Fault  or  negligence  of  the  employer  can  be  proven  in 
much  less  than  20  per  cent,  of  the  cases,  and,  what  is  most 
startling,  no  matter  how  careful  the  employe  and  the  em- 
ployer are,  or  how  high  the  efficiency  of  the  state  may  rise  in 
the  prevention  of  accidents,  the  cause  of  50  to  55  per  cent,  of 
all  accidents  to  employes  is  solely  due  to  the  natural  hazard 
or  dangers  of  the  business— -the  combined  negligence  of  the 
employe  and  the  employer.  On  the  other  hand,  the  cause  of 
16.8  per  cent,  of  all  accidents  are  traceable  to  the  negligence 
of  the  employers,  and  the  cause  of  28.9  per  cent  of  all  acci- 
dents is  attributable  to  the  negligence  of  the  employes.  Under 
the  practical   operations   of  the   common  law   remedy,   based 


''California,  Mississippi,  Ohio,  Oregon,  South  Carolina,  Utah,  Vir- 
ginia. 


COMPULSORY  INSURANCE  21 

upon  fault,  it  is  impossible  to  prove  the  employers  negligent 
in  anything  like  16.8  per  cent,  of  the  cases  of  injuries  to  em- 
ployes. For  that  reason,  the  old  theory  of  making  fault  the 
basis  for  an  action  to  compensation  for  injured  workmen  has 
been  abandoned. 

The  only  available  statistics  in  the  United  States  show- 
ing how  much  compensation  the  dependents  of  workmen 
killed  or  workmen  injured  receive  under  the  present  laws 
in  the  United  States  are  in  the  reports  of  the  investigations 
made  by  the  Russell  Sage  Foundation  in  Allegheny  County, 
Pa.,  1906  and  1907;  the  investigations  of  the  Employers'  Lia- 
bility Commission  of  New  York  State,  and  those  of  the 
Liability  Commission  of  Illinois,  during  the  years  1909-1910, 
and  the  investigations,  now  about  complete,  which  have  been 
made  by  the  experts  of  the  Employers'  Liability  Commission 
of  Ohio  in  Cuyahoga  County  (Cleveland),  during  the  months 
of  November  and  December,  1910,  and  January  and  Feb- 
ruary, 191 1,  covering  fatal  and  non-fatal  accidents  for  the 
period  of  1905-1910.  On  account  of  the  great  importance  of 
the  results  of  these  investigations  in  framing  laws  providing 
for  industrial  insurance  to  workmen,  a  resume  of  their  re- 
sults is  given. 

N'ezv  York  Statistics 

During  the  years  1907- 1908,  ten  insurance  companies, 
which  keep  employers'  liability  records,  doing  business  in 
the  state  of  New  York,  received  in  premiums  from  employ- 
ers, $23,524,000;  they  paid  to  injured  employes,  $8,560,000; 
waste,  $14,964,000. 

It  should  further  be  added  that  ten  liability  insurance 
companies  settled  414,000  cases  in  the  three  years  prior  to 
1910  in  New  York  by  making  payments  in  any  sum  at  the 
rate  of  one  payment  in  eight  cases  or  in  121^  per  cent  of  the 
cases. — (N.  Y.  Report  p.  25.) 

Nothing  could  more  strikingly  set  forth  the  waste  of  the 
present  system  than  the  fact  that  only  36.34  per  cent,  of  what 
employers  pay  in  premiums  for  liability  insurance  is  paid  in 
settlement  of  claims  and  suits.     Thus,  for  every  $100  paid  out 


22  SELECTED  ARTICLES 

by  emploj'ers  for  protection  against  liabilitj-  to  their  injured 
workmen,  less  than  ^37  is  paid  to  those  workmen;  $63  goes 
to  pay  the  salaries  of  attorneys  and  claim  agents,  whose 
business  it  is  to  defeat  the  claims  of  the  injured,  to  the  cost 
of  soliciting  business,  to  the  cost  of  administration,  to 
court  costs  and  to  profit.  Out  of  this  36.34  per  cent,  the 
injured  employe  must  pay  his  attorney.  The  same  report 
shows  that  the  attorneys  get  36.3  per  cent,  of  what  is  paid 
to  the  injured  employes. 

This  investigation  covers  forty-six  cases,  where  the  recov- 
ery was  about  $1500  each.  In  small  recoveries  the  attorney 
fees  take  a  larger  proportion.  This  report  shows  that  some- 
where between  20  and  25  per  cent,  of  the  monej^  paid  bj^  the 
employing  class,  actually  passes  to  the  injured  workingmen 
for  their  dependent  families  in  death  cases. 

The  proportions  of  the  loss  borne  by  employers  in  injury 
cases  does  not  dififer  greatly  from  that  in  death  cases.  Thus, 
out  of  388  injury  cases  of  the  married  men  alone,  56  per 
cent,  receive  no  compensation;  of  single  men  contributing  to 
the  support  of  others,  69  per  cent,  receive  no  coinpensation; 
single  men,  without  dependents.  80  per  cent,  receive  no  com- 
pensation. 

Russell   Sage   Foundation    Investigatiotis    in    Allegheny    County, 
Pennsylvania 

The  investigations  recently  conducted  in  Allegheny  Coun- 
ty, Pa.,  under  the  direction  of  the  Pittsburgh  Survey,  showed 
that  out  of  355  cases  of  men  killed  in  industrial  accidents, 
all  of  whom  were  contributing  to  the  support  of  others,  and 
two-thirds  of  whom  were  married,  89  of  the  families  left  re- 
ceived not  a  dollar  of  compensation  from  the  employer,  113 
families  received  not  more  than  $100,  61  families  received 
something  more  than  this  $100,  but  not  more  than  $500.  In 
other  words,  57  per  cent,  of  these  families  were  left  by  their 
employers  to  bear  the  entire  burden  of  the  income  loss,  and, 
granting  that  all  unknown  amounts  would  be  decided  for  the 
plaintiff,  only  27  per  cent,  received  in  compensation  for  the 


COMPULSORY  INSURANCE  23 

death  of  a  regular  income  provider  more  than  $500,  a  sum 
which  would  approximate  one  year's  income  of  the  lowest 
paid  of  the  workmen  killed. 

J  Viscous  ill   Statistics 

The  Wisconsin  Bureau  of  Labor  and  Industrial  Statistics 
reports  that  in  306  non-fatal  cases  in  which  reports  were  re- 
ceived by  mail  from  workmen  while  at  work  the  compensa- 
tion was  as  follows: 

Cases.  Per  Cent. 

Received  nothing    from    employers 72  23.5 

Received  amount   of   doctor's    bills    only 99  32.4 

Received  amount  of  part  of  doctor's   bills 1.5  4.9 

Received  something  in  addition   to  doctor's   bills     91  29.7 

Received  something,   but  not  doctor's   bills 29  9.5 

Total     306  100.00 

In  two-thirds  of  the  cases,  part  or  all  of  the  doctor's  bills 
were  paid;  in  less  than  a  third  was  anything  more  paid,  and 
in  about  one-fourth  of  the  cases  nothing  whatever  was  paid. 
In  131  non-fatal  cases  in  Wisconsin,  concerning  which 
reports  were  secured  by  factory  inspectors,  the  following  dis- 
position was  made: 

Cases.  Per  Cent. 

Received  nothing   from   employer    28  21.37 

Received  doctor's    bills    only 56  42.75 

Received  something  in  addition  to  doctor's  bills     10  7.63 

Received  something,   but  not   doctor's  bills 34  25.96 

Not  settled    3  2.29 

Total    131  100.00 

Illinois  Statistics 

The  Employers'  Liability  Commission  of  the  State  of  Illi- 
nois has  recently  made  a  report  on  its  investigation  of  in- 
dustrial accidents  and  employers'  liability.  More  than  5000 
individual  accidents  were  investigated  and  recorded,  together 
with  comparative  figures  and  analysis.  The  result  of  the 
investigations  of  the  Illinois  Commission  are  given  by  Ed- 
win R.  Wright,  secretary  of  the  Commission,  and  president 
of  the  Illinois  Federation  of  Labor. 

Six  hundred  and  fourteen  fatal  accidents  were  recorded. 
The  families  of  214  of  these  workers  received  nothing  in   re- 


24  SELECTED  ARTICLES 

turn    for    the    loss    of    the   breadwinner.      One    hundred    and 
eleven  damage  suits  are  pending  in  court.    Twenty-four  cases 
have  been  settled  through  court  proceedings.     Two  hundred 
and  eighty-one  families  settled  directly  with  the  employer. 
Skilled   railroad   employes,    in  settlement   for   death   claims, 

averaged    about    $1,000.00 

Steel    workers    874.00 

Railroad    laborers    617.00 

Skilled    building    tradesmen .> 348.00 

Skilled   electric   railway   employes 310.00 

Unclassified  workingmen    311.00 

Miscellaneous    trades     292.00 

Packing   tiouse    employes 234.00 

General  laborers   154.00 

Mine    workers    155.00 

Electric    railway    laborers 75.00 

Of  every  lOO  industrial  accidents,  15  go  to  court,  7  are 
lost  and  8  are  won.  Ninety-two  injuries  out  of  every  100  re- 
ceive no  compensation.  (This  includes  both  fatal  and  non- 
fatal accidents.) 

There  have  been  53  fatal  cases  of  recent  date.  In  fatal 
cases,  the  usual  defenses  of  the  employers — the  fellow-serv- 
ant doctrine,  assumption  of  risks,  etc.- — did  not  apply,  or  there 
would  have  been  no  recovery  at  all.  For  these— the  very 
pick  of  industrial  cases — the  average  recovery  for  death  was 
only  $1877.36,  of  this  an  average  amount  of  $740.95  was  paid, 
to  attorneys  or  expended  on  court  fees,  etc.,  leaving  an  actual 
payment  of  $1126.41  to  the  family  of  the  dead  worker;  34 
widows  were  compelled  to  seek  employment  and  65  children 
left  school  to  help  keep  the  wolf  from  the   door. 

Germany  and  England 

The  German  state  insurance  during  the  twenty  years  end- 
ing in  1905  required  payments  amounting  to  $802,000,000. 
Of  this  sum,  $555,750,000  were  paid  on  account  of  sickness 
insurance;  $232,750,000  were  paid  on  account  of  accidents,  and 
$13,500,000  paid  on  account  of  invalidism  and  old  age.  To  the 
fund  necessary  to  make  these  payments,  the  employer  con- 
tributed $424,500,000.  The  employes  contributed  $377,000,000, 
and  the  Imperial  Government  paid  the  cost  of  administration 
and  a  small  portion  of  the  funds  necessary  to  take  care  of 
invalidism  and  old-age  pensions  (50  marks  in  each  case  in- 
sured). 


COMPULSORY  INSURANCE  25 

The  general  rules  in  respect  to  the  raising  of  the  insurance 
fund  are  that  the  employes  should  pay  two-thirds  of  the  fund 
necessary  to  take  care  of  sick  insurance,  which  lasts  for  thir- 
teen weeks,  and  the  employers  pay  one-third.  In  the  case 
of  accident  insurance,  the  employers  pay  85  per  cent,  and  the 
employes  15  per  cent.  In  the  case  of  invalidism  and  old- 
age  insurance,  the  Imperial  Government  pays  $12.50  for  each 
person  injured,  and  the  remainder  of  the  fund  is  paid  half 
and  half  by  the  employers  and  employes.  The  German 
plan  in  1907  had  27,172,000  workingmen  insured  against  sick- 
ness, accidents  and  old  age,  out  of  a  population  of  62,000,000 
people. 

The  English  plan  in  1908,  provided  for  the  insurance  of 
13,000,000  workingmen.  In  case  of  death,  the  compensation 
paid  is,  at  most,  three  years'  wages,  £300  or  $1460,  with  a 
minimum  payment  of  three  years'  wages  at  £150  or  $730. 
In  case  of  disability  lasting  longer  than  one  week,  the  com- 
pensation paid  is  one-half  week's  average  wage,  not  to  ex- 
ceed $4.87,  as  long  as  the  disability  lasts.  Responsibility 
for  the  payment  of  the  compensation  rests  solely  on  the 
emploj^er,  and  employes  are  not  required  to  insure. 

In  both  the  German  and  English  plans  the  rules  of  con- 
tributory negligence,  assumption  of  risk,  and  the  fellow-serv- 
ant rules  are  abolished,  and  the  only  kind  of  negligence 
recognized  is  that  of  malicious  negligence  on  the  part  of  the 
employer  or  emploj-e. 

The  statistics  of  the  United  States  show  that  over  50  per 
cent,  of  all  industrial  accidents  are  due  to  the  inherent  dangers 
and  risks  of  the  industrial  business,  that  not  to  exceed  20  per 
cent,  of  all  these  accidents  are  due  to  or  attributable  entirely 
to,  the  negligence  of  the  employer,  and  that,  at  most,  25^  per 
cent,  are  attributable  solely  to  the  negligence  of  the  employe. 
The  common  lazu  furnishes  no  plan  of  relief,  except  zifhere  it 
can  be  proven  that  the  defendant  is  at  fault.  Therefore,  the 
common  law  affords  no  relief  for  something  like  80  per  cent, 
of  all  zvorkingmen  injured  and  killed  in  the  United  States.  The 
lozvest  estimate  of  the  number  of  persons  injured  and  killed  in 
industrial  accidents  in  1909  is  536,000  people. 


26  SELECTED  ARTICLES 

Montana,  in  1910.  put  in  operation  a  mutual  plan  of  in- 
surance for  coal  miners.  The  compensation  paid  the  wife  and 
children  or  dependents  of  a  miner  killed  in  the  due  course 
of  his  employment  is  $3000.  In  case  the  miner  is  totally  dis- 
abled by  an  injury,  he  is  paid  $1  for  each  working  day  during 
disability.  The  loss  of  an  eye,  or  liml),  caused  by  accident 
to  a  miner  while  employed  in  or  about  a  mine  is  compensated 
for  in  the  sum  of  $1000.  The  compensations  are  paid 
from  a  fund  which  is  administered  by  the  auditor  of  state. 
The  operators  contribute  to  this  fund  according  to  the  quan- 
tity of  coal  mined,  and  are  authorized  by  law  to  deduct 
I  per  cent,  from  the  wages  due  the  miners. 

The  New  York  act  of  1910  provided  for  a  compensation 
to  workmen  ranging  from  $1500  to  $3000  in  case  of  death. 
Other  injuries  were  proportionately  compensated.  These 
payments  were  to  be  borne  by  the  employer  whether  he  was 
or  was  not  at  fault.  The  injured  workman  had  the  choice 
of  suing  at  law  or  of  taking  the  compensation.  The  Appel- 
late Court  of  New  York  has   held   this  law  unconstitutional. 

The  employers'  liability  commissions  of  Washington,  Min- 
nesota, Wisconsin  and  Ohio  have  reported  acts  to  their  re- 
spective legislatures  recommending  plans  for  compensation 
of  workingmen  for  injuries  without  regard  to  fault.  The 
Washington  act  provides  a  plan  of  obligatory  mutual  insur- 
ance, the  state  being  the  custodian  of  the  fund.  Compensa- 
tion varies  from  $1500  to  $4000  in  case  of  death  or  total  dis- 
ability. This  law  has  been  enacted.  Non-fatal  injuries  are 
compensated  for  at  about  60  per  cent,  of  the  impairment  of 
wages  of  the  workingmen  injured.  The  act  defines  a  large 
class  of  dangerous  employments.  The  employe  waives  the 
right  to  sue,  and  is  compelled  to  accept  the  compensation 
provided  by  the  act  in  lieu  of  all  other  remedies.  The  Wash- 
ington plan  also  stipulates  that  the  employer  shall  contribute 
to  the  first-aid  fund  4  cents  for  each  workday  that  an  employe 
worked,  which  takes  care  of  the  injured  workingman  for  the 
first  three  weeks  following  the  injur3\  The  law  authorizes 
the  employer  to  deduct  2  cents  each  workday-  from  the  wages 
of  his   employe. 


COMPULSORY  IXSURANCK  27 

The  Minnesota  plan  is  based  upon  state  insurance  and  is 
applicable  to  all  dangerous  employments.  The  compensa- 
tions are  liberal,  ranging  from  $1500  to  $.3000,  in  case  of 
death.  The  compensation  for  workingmen  partially  disabled 
is  50  per  cent,  of  the  impairment  of  their  earning  power.  The 
Wisconsin  act  is  optional  and  follows  the  New  York  act  in 
its  principles   and    amounts    of  compensation. 

New  Jersey,  in  191 1,  enacted  a  comprehensive  employers' 
liability  and   workingmen's   compensation   law. 

Massachusetts,  Connecticut,  Missouri  and  Texas  have 
commissions  studying  the  problem.  Many  of  the  other  state 
legislatures  are  considering  bills  to  abolish  or  largely  modify 
the   common   law   defenses. 

The  International  Harvester  Company  has  put  into  opera- 
tion a  voluntary  plan  of  industrial  insurance  which  provides 
compensation  varying  in  amount  from  doctor's  bills  to  $4000. 
the  employes  are  not  obliged  to  contribute  anything  to  the 
fund,  and  compensations  are  paid  without  regard  to  fault. 
The  acceptance  of  the  compensation  releases  the  company 
from  a  suit  at  law. 

These  numerous  state  commissions  are  endeavoring  to 
answer  the  question.  What  plan  of  compensation  shall  be 
substituted  for  the  old  common  law  action  based  upon  the 
fault  of  the  employer?  The  evidence  indicates  that  the  most 
just  and  efficient  remedy  is  obligatory  industrial  insurance, 
such  as   prevails  in   German}'. 

Chautauquan.  41:  8-59.  March,  1905. 

Compulsory   Insurance.     I.   M.   Rubinow. 

Under  pressure  of  economic  necessity  a  sj'stem  of  mutual 
aid  sprang  up  in  the  main  industrial  countries,  whose  function 
it  was  to  render  assistance  to  the  destitute  workingman  and 
so  help  him  tide  over  the  critical  moment.  What  private  or 
public  charity  was  forced  to  do  for  many  centuries,  the 
sick  benefit  societies  {Krankenkassen)  of  Germany  or  the 
trade    unions    of    England    have    tried   to    accomplish    by    co- 


28  SELECTED  ARTICLES 

operative  effort.  Yet  this  necessary  work  was  done  very 
unsatisfactorily  indeed  when  about  the  year  1880  the  Ger- 
man government  came  out  with  its  project  of  compulsory  in- 
surance. 

It  is  not  necessary  to  go  into  a  searching  inquiry  as 
to  the  motives  which  influenced  Bismarck  to  undertake  what 
has  been  frequently  called  a  system  of  state  socialism.  It 
has  been  established  with  a  sufficient  degree  of  certainty, 
that  Bismarck  was  more  anxious  to  counteract  the  rising 
wave  of  socialism  than  to  improve  the  condition  of  the  work- 
ing masses.  Yet  it  is  acknowledged  that  Bismarck's  method 
of  fighting  the  spread  of  socialism  was  through  the  improve- 
ment of  the  condition  of  the  workingmen;  and  that  the  grand 
structure  of  compulsory  state  insurance  of  workingmen  de- 
noted such  improvement,  cannot  at  present  be  denied. 

Insurance  against  sickness  was  the  first,  in  point  of  time, 
to  grow  up  in  Germany.  After  several  years  of  considerable 
discussion  and  agitation,  a  bill  was  introduced  in  the  Ger- 
man parliament  in  1881  and  with  many  modifications  finally 
became  a  law  in  1883.  Several  important  changes  were  sub- 
sequently made,  and  the  law  as  it  exists  today  dates  from  the 
loth  of  June,  1892.  The  changes  consisted  mainly  in  the  ex- 
tension of  its  force  over  classes  of  wage  earners  omitted  in 
the  original  law,  until  today  domestic  servants  are  the  only 
large  class  of  wage  earners  for  whom  sickness  insurance  is 
not  compulsorj-,  though  they  may  avail  themselves  of  its 
benefits. 

The  popularity  of  sick  benefit  funds  among  the  German 
workingmen  for  many  decades  before  a  system  of  state  in- 
surance was  thought  of,  has  provided  Germany  with  a  type 
of  institution  capable  of  handling  the  technical  aspects  of  the 
problem;  the  state  has  therefore  been  relieved  from  under- 
taking the  actual  work  of  insurance;  its  action  is  limited  to 
compulsion,  regulation,  and  control.  Because  of  this  compul- 
sion almost  each  and  every  German  workingman  is  insured 
against  sickness,  or  rather  the  economic  burdens  of  it,  in 
some  organization;  be  it  a  "local  fund"  to  which  all  working- 
men   of   a   small   locality   belong,   or   a   "factory   fund"  where 


COMPULSORY  INSURANCE  29 

all  the  employees  of  a  great  industrial  establishment  are  in- 
sured, or  again  a  "trade  fund"  uniting  all  workingmen  of 
a  certain  trade  in  a  great  industrial  center.  These  funds 
(Kassen)  are  managed  partly  by  the  employers,  partly  by  the 
employees.  The  state  then  sees  to  it  that  whoever  comes 
under  the  provisions  of  the  law,  should  be  insured,  that  the 
payment  should  be  made,  that  no  abuse  be  possible  and  that 
a  certain  minimum  of  assistance  be  granted  by  the  fund;  but 
many  funds  in  the  larger  industrial  centers  grant  a  great 
deal  more  than  the  minimum  required.  Of  the  necessary 
premiums  the  workingman  pays  two-thirds  and  the  em- 
ployer contributes  one-third.  The  legislator  has  evidently 
acknowledged  that  no  matter  how  difficult  it  may  be  to  estab- 
lish the  direct  cause  of  each  individual  case  of  sickness,  em- 
ployment as  such  is  an  important  factor  in  the  causation  of 
disease.  The  employer,  i.  c,  the  business,  must  contribute 
to  the  expenses  of  the  cure  and  care  of  the  sick  and  their 
financial  support,  just  as  business  is  supposed  to  cover  the 
expenses  of  fire  insurance  and  wear  and  tear  of  the  inanimate 
machine.  The  expenses  of  insurance  to  the  worker  are  ex- 
ceedingly small;  they  vary  according  to  the  organization  and 
locality  between  ij^2  per  cent  and  4  per  cent  of  the  working- 
man's  wages  and  very  rarely  exceed  3  per  cent;  and  with  a 
rate  of  wages  of  3  to  4  marks  (60  to  80  cents)  per  day,  the 
premium  varies  between  i  and  3.2  cents  a  day,  or  6  and  20 
cents  a  week,  only  two-thirds  of  which  are  paid  by  the  em- 
ployee,  or   rather  by  the   employer  for  him. 

Now  let  us  see  what  the  workingman  gets  for  his  "one 
cent  a  day."  The  benefits  of  the  "sickness  funds"  include,  as 
a  minimum,  (i)  free  medical  and  surgical  treatment,  as  long 
as  necessary,  up  to  twenty-six  weeks;  medicines  and  any 
special  treatment  that  may  be  found  necessary,  operations, 
obstetrical  attendance,  massage,  electricity,  baths,  as  well  as 
medical  apparatus,  glasses,  crutches,  and  even  artificial  limbs 
in  some  Kassen;  (2)  financial  assistance  to  the  patient  or 
his  family,  equal  to  50  per  cent  of  his  wages  at  least,  and 
in  some  Kassen  as  much  as  75  per  cent.  Insured  working- 
women  are  entitled,  besides,  to  a  subsidy  in  case  of  childbirth, 


30  SELECTED  ARTICLES 

so  as  to  enable  them  to  discontinue  work  botli  before  and 
after  the  consummation  of  the  act  of  maternity.  Burial 
money  is  also  given  by  these  institutions,  equal  to  from 
twenty  to  forty  times  the  daily  wage  of  the  deceased.  While 
these  benefits  are  obligatory  and  universal,  the  activity  of 
the  large  "sickness  funds"  in  the  many  industrial  centers  has 
been  very  much  widened,  and  here  we  see  the  beneficent 
results  of  cooperative  activity  under  the  encouragement  of 
the  state  or  the  society  at  large.  Not  only  have  the  benefits 
been  made  much  more  liberal,  but  the  advantages  of  free 
medical  treatment  have  been  extended  over  the  wage  work- 
er's families;  hospital  treatment  and  even  a  prolonged  sojourn 
in  sanatoria  and  institutions  for  convalescents  have  been 
provided  by  some  of  the  Kassen. 

Consider  for  a  moment  what  this  simple  legislative  act 
— which  took  into  cognizance  all  existing  institutions  for 
self-help,  and  simply  extended  and  regulated  their  activity 
— what  it  meant  for  the  laboring  population  of  Germany. 
It  did  away  with  the  necessity  of  degrading  medical  charity 
which  introduces  so  much  demoralization  into  the  homes  of 
the  American  wage  worker.  The  physician  who  treats  the 
German  worker  free  is  paid  bj^  the  Krankenkassen;  all  the 
benefits  that  are  given  to  the  sick  are  given  because  they 
are  due  to  him,  because  it  is  his  right  to  demand  and  receive 
them.  When  struck  down  with  a  serious  illness,  and  unable 
to  continue  his  regular  work,  the  German  workingman  does 
not  immediately  fall  into  the  atmosphere  of  condescension 
and  pity,  mingled  with  contempt.  The  material,  hygienic  and 
economic  results  are  still  more  palpable,  than  the  psycho- 
logic ones.  The  fear  of  a  large  professional  bill  does  not 
deter  the  German  worker  from  receiving  necessary  medical 
advice  and  assistance;  one  case  of  illness  with  its  enormous 
expenses  and  concomitant  loss  of  income  does  not  destroy 
forever  the  economic  independence  of  a  self-sustaining  fam- 
ily. As  the  French  investigator,  Edouard  Fuster  has  well 
said,  "The  German  system  of  sickness  insurance  saves  the 
German  worker  his  health  and  the  German  nation  its  vital 
powers." 


COMPULSORY  IXSURAXXE  31 

Bodilj'  ailmcntri  are  scourges  of  all  humanity  witliout 
consicleratioH  of  class  or  creed,  but  modern  industrial  life 
has  subjected  the  worker  to  a  long  list  of  accidents  to  limb 
and  life,  which  arc  specifically  his  own.  The  enormous 
development  of  machinerj^  and  the  utilization  of  mechanical 
power,  the  swiftness  of  transportation  methods,  the  dizzy 
height  of  building  operations,  and  above  all  the  nervous 
tension  and  hurry  of  a  strenuous  life,  all  these  causes  have 
contributed  to  increase  the  frequencj'  of  accidents  and  in- 
juries to  an  alarming  degree.  Here  we  have  a  sum  total 
of  effects  whose  causation  by  industry  cannot  be  doubted. 
For  a  long  time  European  legislation  had  been,  and  Ameri- 
can legislation  even  now  is,  much  more  preoccupied  with  the 
interesting  problem  of  placing  the  blame  of  each  individual 
accident,  than  the  economically  important  effort  at  minimiz- 
ing the  injurious  effects  of  them  all.  The  Anglo-Saxon  sys- 
tem of  individual  responsibility  for  an  accident  has  been  a 
signal  failure  as  far  as  the  reimbursement  of  the  victim 
has  been  concerned.  A  whole  series  of  common  law  doc- 
trines grew  up  to  limit  the  chances  of  obtaining  such  reim- 
bursement. The  "fellow  servant"  doctrine  denies  the  work- 
er the  right  to  recover  damages,  if  injured  through  careless- 
ness of  any  co-employee.  The  doctrine  of  contributory  neg- 
ligence relieves  the  employer  even  in  cases  of  acknowledged 
culpability,  if  it  can  be  shown  that  the  injured  worker  has 
also  been  somewhat  negligent;  thus  the  worker,  who  is  only 
partly  responsible,  bears  all  the  consequences  and  the  em- 
ployer, also  partly  responsible,  bears  none.  The  doctrine  of 
assumed  risk  teaches  that  the  workingman  who  has  know- 
ingly accepted  dangerous  employment  shall  stand  all  the 
consequences.  And  there  are  many  others,  no  less  far-reach- 
ing in  their  influence.  The  effect  of  all  this  is  to  make  the 
cases  of  reimbursement  of  the  poor  wretches  who  have  lost 
limb  or  health,  and  the  widows  and  children,  a  very  rare 
and  problematic  possibilit3^  Nor  does  a  system  like  this 
tend   to  promote  the  introduction   of  preventative  measures. 

The  German  system  of  accident  insurance  was  a  radical 
departure  from  this  old  method.     Assistance  to  the  sufferer 


32  SELECTED  ARTICLES 

is  made  the  very  important  problem.  It  is  also  acknowl- 
edged that  whether  the  individual  worker  be  negligent  or 
not  (and  some  acts  of  carelessness  are  committed  by  every 
human  being)  the  industry  as  a  whole  is  responsible  for  the 
frequency  of  accidents,  and  that  the  industry,  i.  e.,  the  em- 
ployers, should  pay  all  the  expenses  connected  with  acci- 
dent insurance.  The  first  law  establishing  compulsory  ac- 
cident insurance  was  passed  on  June  6,  1884,  approximately 
one  year  after  the  experiment  of  sickness  insurance  was 
made.  At  first  it  applied  to  industrial  workers  only;  in  1886 
the  law  was  extended  to  cover  those  employed  in  forestry 
and  agriculture,  and  in  1887  the  building  trades  and  seamen. 
The  entire  accident  insurance  legislation  as  it  exists  today 
is  a  result  of  complete  revision  and  codification  in  1900. 
Unions  of  employers  in  each  important  branch  of  industry 
were  created  and  the  funds  made  up  by  contributions  from 
the  individual  employers,  the  amounts  being  levied  by  as- 
sessment according  to  the  size  of  the  enterprise,  number  of 
workers,  and  also  frequency  of  accidents.  The  organization 
by  industries  was  thought  essential  because  of  the  great 
difference  in  frequency  of  accidents  in  various  industries. 
On  the  other  hand  the  system  of  assessments  shifts  upon 
the  careless  employer  the  burden  of  an  excesive  frequency 
of  accidents  in  his  establishment. 

The  benefits  paid  to  the  insured  are  quite  liberal  and 
thorough.  The  minor  accidents  which  do  not  require  at- 
tendance beyond  the  first  thirteen  weeks,  are  taken  care  of 
by  the  sick  insurance  funds.  From  the  fourteenth  week  on, 
the  injured  receives  medical  attendance,  medicines,  etc.,  as 
long  as  necessary,  and  financial  assistance  as  long  as  his 
disability  lasts,  even  for  the  rest  of  his  life,  if  the  disability 
be  permanent.  The  injured  workman  is  entitled  to  two- 
thirds  of  his  wages  for  total  disability  to  engage  in  any 
gainful  employment,  and  a  proportionate  amount  of  the  two- 
thirds  if  his  disability  be  only  partial,  the  facts  in  the  case 
and  the  degree  of  disability  being  decided  by  a  medical 
board.  In  case  of  death  of  the  injured  person,  whether  it 
be   the  immediate   result   of  the  accident  or  not,   the  widow 


COMPULSORY  INSURANCE  33 

and  orphans  below  fifteen  years  of  age,  each  receive  an  an- 
nuity equal  to  20  per  cent  of  the  earnings  of  the  lost  bread- 
winner; the  maximum  annuity  is,  however,  limited  to  60 
per  cent.  The  relatives  in  the  ascending  line  are  entitled  to 
an  annuity  equal  to  20  per  cent  of  the  wages  and  grand- 
children have  the  same  rights  if  they  had  been  depending 
on  the  deceased  for  their  support.  In  case  of  remarriage, 
the  widow  (but  not  the  children)  loses  her  right  to  the  an- 
nuity, but  receives  the  final  payment  of  60  per  cent  as  a 
dowry.  A  special  payment  is  also  made  to  cover  the  funeral 
expenses  in  case  of  death,  which  equals  one-sixteenth  of 
the  annual  wages,  but  cannot  be  less  than  fifty  marks  ($12). 
There  are  numerous  minor  benefits  as  well  as  provisions 
to  safeguard  the  interests  of  the  victims  of  the  accident  as 
well  as  those  dependent  upon  him.  Too  much  stress  can 
not  be  laid  upon  the  fact  that  the  causation  of  the  individ- 
ual accident  and  the  degree  of  carelessness  of  the  injured 
are  totally  disregarded  in  deciding  the  amount  of  the  an- 
nuity, except  in  so  far  as  to  exclude  injuries  wilfull)^  and 
maliciously   self-inflicted. 

All  these  payments  cannot  recompense  the  injured  work- 
man for  a  lost  limb,  or  ruined  health,  cannot  console  the 
widow  and  orphans  for  the  loss  of  a  dear  life.  But  no 
human  power  has  succeeded  in  accomplishing  all  that.  What 
the  system  of  accident  insurance  has  succeeded  in  bringing 
about,  is  an  avoidance  of  all  costly  and  tedious  litigation, 
which  promised  little  and  taxed  the  workingman  much,  and 
made  him  wait  long  even  in  those  cases  where  the  employ- 
er's gross  neglect  was  perfectly  self-evident.  It  established 
the  principle  that  an  industrial  worker,  who  had  spent  his 
health  and  life  in  the  production  of  goods  socially  useful,  is 
entitled  to  a  better  fate  than  starvation  and  misery,  if  in- 
capacitated while  in  performance  of  useful  work — a  principle 
universally  admitted  with  regard  to  the  soldier  by  the  whole 
American  people.  It  has  given  the  German  workingman  a 
sense  of  security  for  the  future  which  his  American  comrade, 
notwithstanding  his  higher  rate  of  wa-ges,  certainly  does  not 
possess. 


34  SELECTED  ARTICLES 

Sickness  or  accidents  are  the  emergencies  of  a  working- 
man's  life,  frequent,  and  to  be  expected,  yet  not  inevitable 
and  often  temporary.  They  do  not  by  far  complete  the  list 
of  all  the  vicissitudes  of  a  wage-worker's  existence.  Without 
any  special,  definite,  easily-to-be-noticed  case  of  violence, 
the  health  and  strength  of  the  worker  may  be  so  reduced, 
as  to  make  him  unfit  to  obtain  profitable  employment.  Such 
cases  must  necessarily  grow  with  the  general  tendency  of 
speeding  up  the  processes  of  manufactures.  Ten  to  twelve 
hours  of  continuous  work  at  the  high  rate  of  tension  which 
prevails  in  the  modern  factory,  frequently  produce  that  pre- 
mature old  age,  which  is  a  typical  and  distressing  feature 
of  modern  civilization.  Again,  quite  apart  from  any  of  these 
cases  of  invalidity  and  premature  old  age,  there  is  for  the 
workingman  that  inevitable  prospect  of  an  old  age  perhaps 
quite  normal  and  physically  unavoidable,  during  which  a 
quest   for   a  job   would  meet  no  encouragement. 

Perhaps  nothing  is  more  distressing  in  the  conditions  of 
modern  life,  than  the  sight  of  an  old  and  decrepit  man  forced 
to  eke  out  his  existence  by  the  work  of  old  shaky  hands,  by 
means  of  weakened,  half-blind  eyes.  What  becomes  of  all 
these  men  who  get  nothing  to  eat  unless  they  work?  What 
becomes  of  them  when  they  are  too  old  to  work?  They 
fill  the  hospitals,  the  poor-  and  work-houses,  are  often  sup- 
ported by  their  children,  and  some  of  course,  "retire,"  i.  e., 
they   live   on  the  proceeds  of  their  savings. 

But  how  man)-  can  save?  It  seems  to  be  the  widely  ac- 
cepted theory  in  this  country,  that  all  who  wish  can  save, 
and  that,  too,  sufiiciently  to  last  them  through  their  declining 
days.  Our  overseers  of  the  poor,  and  chiefs  of  departments 
of  charities  and  corrections  may  possibly  hold  a  different 
opinion.  A  German  ofiicial  investigator,  Professor  Bielefeldt. 
states  the  case  very  succinctly  when  he  says,  that  "wages 
as  a  rule,  are  about  sufficient  to  satisfy  the  ordinary  demands 
of  ever3^-day  existence,  and  totally  fail  at  the  time  of  extra- 
ordinary disturbances  of  the  working  labor  power  of  the 
bread-winner  of  a  family."  How  much  more  true  it  is  of 
cases    of    complete    and    permanent    failure    of    labor    power! 


COMPULSORY  INSURANCE  35 

The  system  of  invalid  and  old  age  insurance  naturally  came 
as  a  fitting  sequel  to  insurance  against  sickness  and  acci- 
dents. The  German  law  making  such  insurance  compulsory 
was  promulgated  in  June  of  1889,  and  revised  in  1899,  in 
which  form  it  is  in  force  at  present.  In  point  of  latitude  the 
law  is  more  sweeping  than  the  sick  insurance  law,  and  it  in- 
cludes besides  wage  workers,  also  independent  tradesmen 
and  even  petty  employers   of  labor. 

At  the  time  when  the  plans  for  old  age  insurance  were- 
elaborated  in  Gerinany  two  tendencies  asserted  themselves. 
Some  aimed  to  make  it  a  system  of  pensions  and  proposed 
to  put  the  whole  burden  on  the  state  treasury,  others  thought 
that  insurance  should  only  be  modified  saving  and  that  the 
state  should  do  no  more  than  encourage  and  even  compel, 
if  necessary,  each  workingnian  to  save.  The  system,  as  it 
was  actually'  carried  through,  was  a  combination  of  both 
principles. 

Every  person  of  the  classes  designated  must  be  insured 
if  over  sixteen  years  of  age.  The  insurance  demands  a 
weekly  payment  of  from  14  to  36  pfennigs  (from  3  to  8 
cents)  a  week,  according  to  the  amount  of  wages  received; 
this  payment  is  divided  equally  between  the  employers  and 
the  employees,  so  that  the  workingman  contributes  only 
from  lYi  io  4  cents  a  week.  The  state's  share  consists  in 
contributing  50  marks  ($12)  a  year  to  each  pension  or  an- 
nuity, besides  sharing  to  a  large  extent  in  the  expenses  of 
administration.  In  return  for  his  small  payments  the  in- 
sured is  entitled  to  an  invalid  pension  in  case  of  a  general 
failure  of  health  or  a  prolonged  sickness  (if  it  lasts  over 
twenty-six  weeks  during  which  the  sick  benefit  funds  render 
the  necessary  assistance).  The  annual  amount  consists  of 
the  fifty  marks  supplied  by  the  government  and  an  annual 
sum  determined  in  a  rather  complicated  way  by  the  amount 
of  the  weekly  payment  and  a  third  sum  dependent  upon  the 
number  of  payments  actually  made.  Thus  there  are  com- 
bined in  this  system  the  three  elements  of  pension,  insurance 
and  savings.  The  actual  sum  varies  from  116  to  450  marks 
a  year. 


36  SELECTED  ARTICLES 

A  similar  annuity  is  paid  to  each  insured  who  has  reached 
the  age  of  seventy,  provided  he  has  paid  in  at  least  1,200 
weekly  premiums  (that  is  for  about  25  years) ;  the  amount 
of  the  old  age  annuity  is  much  smaller,  varying  between  no 
and  230  marks.  There  are  also  various  provisions  for  medi- 
cal treatment  of  the  invalids,  return  of  monies  to  working- 
women  at  the  time  of  their  marriage,  etc.  The  sums  paid 
are  not  any  too  extravagant,  it  is  true,  and  the  age  of  seventy 
years  so  high,  that  the  workingmen  have  justly  refused  to 
become  very  enthusiastic  over  the  prospect  of  $26  to  $54  a 
3'ear  at  an  age  which  a  hard  working  man  reaches  very  rare- 
ly, though  it  must  not  be  forgotten  that  this  sum  means  a 
great  deal  more  in  Germany  than  in  the  United  States.  Yet 
the  invalid  insurance  is  more  promising,  and,  what  is  much 
more  important,  the  German  insurance  legislation  is  not 
at  a  standstill.  The  first  wedge  has  been  entered,  the  prin- 
ciple has  been  established,  and  further  efforts  will  undoubted- 
ly bring  about  the  desired  results,  that  the  self-respecting 
wage  worker  need  not  fear  becoming  a  pauper  or  a  public 
charge  at  an  age  that  should  command  respect,  and  should 
be  entitled  to   the  comforts  of  quiet   home  life. 

For  some  years  Germany  stood  alone  in  her  bold  under- 
taking. The  industrial  world  watched  with  horror  these  en- 
croachments upon  the  time-honored  political  philosophy  of 
"laissez   faire." 

But  the  beneficial  results  of  this  scheme  became  so  palpa- 
ble, that  its  influence  did  not  fail  to  extend  far  beyond  the 
borders  of  the  German  Empire.  At  first  the  opposition  to 
"this  craze  of  compulsion,"  as  it  was  called  by  an  Italian 
economist,  was  violent  and  bitter.  But  opposition  soon  gave 
way  to  imitation.  The  semi-German  neighbor  of  Germany, 
Austria,  was  the  first  to  follow.  The  Austrian  system  of 
sick  insurance,  introduced  in  1888,  was  an  improved  copy  of 
the  German  Legislation.  The  minimum  of  sick  money  has 
been  made  60  per  cent  instead  of  50,  and  the  agitation  has 
finally  resulted  in  a  sickness  insurance  law  which  was  made 
applicable  to  all  industrial  and  agricultural  workers'  with  a 
maximum  wage  of  1,200  gulden   (about  $480).     In  the  matter 


COMPULSORY  INSURANCE  zy 

of  accident  insurance,  German  influence  was  still  more  po- 
tent, even  if  most  other  countries  have  somewhat  modifled 
the  German  system.  The  Austrian  law  of  1887  has  closely 
followed  the  German  pattern,  though  the  organization  of  the 
funds  is  not  by  industries,  but  by  territorial  divisions.  An- 
other distinct  feature  of  the  Austrian  system  is  that  the  work- 
men are  made  to  participate  in  the  expenses  of  accident  in- 
surance to  the  extent  of  10  per  cent. 

Until  1895  Germany  and  Austria  kept  this  isolated  posi- 
tion. Then  almost  all  the  other  European  nations  rapidly 
fell  in  line.  Norwaj',  Finland,  Italy  and  Holland  have  by 
this  time  systems  of  obligator}^  accident  insurance.  All  these 
countries  have  organized  central  governmental  banks  to 
carry  on  the  insurance  business,  but  kept  the  provision  forc- 
ing the  employer  to  pay  all  the  charges.  The  last  three 
states  named  also  permit  insurance  in  private  insurance  com- 
panies. 

In  a  number  of  European  countries  a  somewhat  modified 
sj'Stem  has  been  introduced,  which  goes  b}-  the  name  of 
compulsory  compensation  for  accidents.  No  special  organ- 
izations are  created,  but  the  individual  employer  is  financially 
responsible  for  the  payment  of  indemnities  and  annuities 
without  the  slow  process  of  litigation.  Great  Britain,  since 
1898.  Denmark  and  France  since  1899,  Sweden  since  1901, 
have  been  among  these  countries.  Even  backward  Russia 
was  forced  to  yield  to  the  demands  of  the  workers  and  pul)r 
lie  opinion,  and  has  had  a  similar  law  since  January  i,  1904. 
Belgium  passed  its  law  before  the  close  of  1903,  to  take 
effect  during  the  current  year.  In  so  far  as  it  guarantees 
the  workingman  the  benefits  of  compensation  when  an  ac- 
cident does  occur,  it  is  a  system  of  insurance  in  principle,  if 
not  in  name.  Unfortunately  it  works  very  imperfectly.  The 
recalcitrant  and  irresponsible  employer  must  frequently  be 
sued  against,  and  in  cases  of  the  small  and  financially  weak 
employer  of  labor,  a  prolonged  payment  of  an  annuity  be- 
comes somewhat  uncertain  in  these  days  of  insecurity  for 
even  considerable  enterprises.     When  the  employer  has  failed. 


46183 


38  SELECTED  ARTICLES 

the    claim    of  the    invalid,    though   usually   given    a    preferred 
standing,  may  or  may  not  be  made  good. 

These  harmful  features  are  somewhat  limited  by  the  per- 
mission granted  to  the  employer  to  reinsure  himself  against 
these  claims  in  some  private  company,  and  it  is  a  powerful 
argument  in  favor  of  insurance  that  the  better  class  of  em- 
ployers usually  prefer  to  do  so.  However,  the  protests 
against  this  half  measure  are  loud  in  France,  Belgium  and 
Russia,  and  a  closer  modeling  after  the  German  pattern  is, 
in  these  countries,  probably  a  matter  of  time.  But  in  no 
industrial  country  of  Europe  has  the  old  system  survived, 
with  litigation  for  a  bulk  sum,  the  larger  part  of  which  falls 
into  the  hands  of  the  rapacious  attorney,  while  in  most  cases 
no  damages  can  be  recovered  at  all. 

No  other  European  country  has  as  yet  followed  Germany's 
example  in  the  matter  of  a  thorough  and  universal  system  of 
old  age  and  invalid  insurance;  but  scarcely  a  civilized  coun- 
try can  be  named  in  Europe  where  the  scheme  has  not  been 
agitated  during  the  last  ten  years,  and  has  not  been  discussed 
and  presented  to  the  legislative  bodies.  In  fact  so  rapidly 
does  the  influence  of  the  German  institutions  spread,  that  any 
statement  made  is  liable  to  be  out  of  date  the  next  day. 
Since  i8gi  no  single  year  has  passed  but  has  brought  some 
important  measure  in  the  domain  of  labor  insurance  in 
some  European  country.  Above  all  it  must  be  pointed  out, 
that  the  influence  of  German  example  is  much  broader  than 
the  few  quoted  examples  of  cojtipulsory  insurance  would  in- 
dicate. 

It  is  absolutely  impossible  in  this  paper  to  give  even  a 
brief  survey  of  the  many  and  varied  systems  of  voluntary  in- 
surance existing  in  France,  Italy,  Belgium,  England,  Switzer- 
land— in  fact  in  almost  all  European  countries.  The  exist- 
ence of  these  voluntary  and  private  organizations  aiming  at 
assistance  in  case  of  sickness,  and  of  various  private  and 
governmental  savings  banks,  to  encourage  savings  and  pro-  - 
vision  for  the  future,  is  often  pointed  at  as  an  argument 
against  the  necessity  of  compulsory  insurance  systems.  Yet  the 
development   of   even  these  institutions,   under   governmental 


COMPULSORY  INSURANCE  39 

control  and  often  with  governmental  assistance,  was  due  to 
the  stimulus  of  the  German  example;  notably  so  in  France, 
Belgium  and  the  Scandinavian  countries.  But  notwithstand- 
ing this  considerable  governmental  aid,  the  number  of  in- 
sured remains  as  small  and  the  struggle  for  a  comprehensive 
compulsory  system  continues. 

Statistical  figures  usually  make  very  dry  reading,  and  it 
is  not  the  purpose  of  this  short  study  to  frighten  away  the 
reader  from  a  subject  exceedingly  serious  and  complicated, 
and  therefore  necessarily  difficult,  by  delving  in  unnecessary 
technicalities  and  details.  Yet  a  few  statistical  data  are  quite 
necessary  to  convey  a  proper  conception  of  the  important 
result  already  achieved  within  the  short  period  of  twenty 
years. 

In  1902  the  German  Empire  had  a  population  of  57,700,000 
and  the  number  of  wage  workers  was  approximately  above 
10,500,000.  In  that  year  there  were  10,500,000  persons  insured 
against  sickness,  17,600,000  against  accident,  and  13,400,000 
names  were  enrolled  for  old  age  and  invalid  insurance.  The 
diflferences  are  due  to  the  fact  that  the  different  laws  do  not 
all  embrace  exactly  the  same  classes,  and  as  voluntary  insur- 
ance is  permitted  to  large  groups  of  persons  for  whom  it 
is  not  made  obligatory,  the  three  insurance  systems  do  not 
prove  an  equal  attraction.  In  the  case  of  accident  insurance 
the  number  of  insured  actually  surpasses  the  number  of  wage 
workers;  it  evidently  includes  many  hundreds  of  thousands 
from  other  economic  classes.  The  figures  certainly  show 
that  the  German  system  of  insurance  is  a  universal  system 
of  insurance. 

During  these  seventeen  years  almost  48,000,000  cases  of 
illness  with  more  than  809,000,000  sick  days  have  come  under 
the  care  of  the  sick  benefit  funds  and  over  1,000,000  victims 
of  accidents  assisted.  For  the  period  of  seventeen  years  the 
total  income  of  the  sick  insurance  funds  reached  the  enor- 
mous sum  of  $504,100,000  of  which  $144,500,000  was  contrib- 
uted by  the  employers  and  $335,200,000  by  the  employees 
and  $23,400,000  was  received  as  interest  and  other  income. 
The   expenses  for  the  same  period  were  $464,200,000,  leaving 


40  SELECTED  ARTICLES 

with  the  sick  benefit  funds,  a  reserve  of  $43,700,000.  Of  this 
enormous  sum  only  $27,000,000  or  5.8  per  cent  was  spent  for 
purposes  of  administration,  and  all  the  rest  went  directly  to 
help  the  insured.  ^loreover  these  expenses  show  a  marked 
tendency  to  decrease.  In  1885  they  were  6.31  per  cent  of 
the  total  expenses,  and  in  1901  only  5.61  per  cent.  Certainly 
no  private  insurance  company  in  the  world  was  able  to 
make  such  a  showing,  and  with  some  of  the  American  in- 
surance companies  who  make  a  specialty  of  insuring  people 
of  moderate  means,  the  expenses  of  administration  were 
four  or  five  times  as  high. 

The  results  of  accident  insurance,  though  told  in  some- 
what smaller  numbers,  are  in  their  way  no  less  imposing. 
For  the  same  period  the  income  was  $230,800,000,  all  of 
which  with  the  exception  of  $28,400,000  of  miscellaneous  in- 
come, was  paid  by  the  employers.  Here  the  expenses  have 
been  $198,100,000,  leaving  a  reserve  of  $42,700,000. 

Old  age  and  invalid  insurance  has  been  in  existence  a 
much  shorter  time,  but  its  operations  from  the  very  begin- 
ning have  been  on  a  much  larger  scale;  for  the  eleven  years 
1891-1901  altogether  $376,100,000  has  been  collected  of  which 
$285,500,000  has  been  contributed  by  employers  and  em- 
ployees in  approximately  even  shares;  the  share  of  the  state 
constituted  $50,200,000  and  $40,500,000  came  from  miscellane- 
ous sources.  The  payments  here  were  necessarily  much 
smaller,  the  larger  part  going  into  a  reserve  fund  for  future 
pensions.  The  total  expenditures  were  $161,000,000  of  which 
only  $18,300,000  or  11.4  per  cent  was  for  purposes  of  adminis- 
tration. From  1891  to  1901  the  expenses  of  administration 
had  fallen  from  20.3  per  cent  to  9.3  per  cent.  The  reserve 
fund  of  the  old  age  insurance  system  has  reached  within 
eleven  years  the  enorinous  amount  of  $217,400,000. 

For  all  forms  of  insurance  together,  $1,121,000,000  was 
received,  of  which  $500,000,000  was  contributed  bj^  the  em- 
ployers, $469,000,000  by  the  workers,  $50,200,000  by  the  state, 
and  $92,000,000  from  other  sources,  mainly  interest.  The  ex- 
penditures were  $821,000,000  of  which  $78,600,000  were  for 
administration   purposes,   or  9.6  per   cent.      -\n   enormous   re- 


\ 


COMPULSORY  IXSURANCE  41 

serve  capital  of  $303,800,000  was  collected,  to  be  devoted  to 
the  welfare  of  the  workers  in  the  future.  We  have  used 
these  large  totals  for  seventeen  years  for  the  purpose  of 
emphasizing  the  enormous  dimensions  of  German  insurance 
activity.  It  must  not  for  a  moment  be  thought,  however, 
that  a  range  of  one  year's  activity  can  be  obtained  through 
a  simple  division  of  the  totals  by  seventeen.  The  influence 
of  labor  insurance  has  rapidly  grown  in  quantity  as  well  as 
quality,  and  in  igoi  alone  the  payments  received  were 
$123,200,000  and  the  expenditures  $99,300,000.  Of  all  the 
sources  of  income  the  contributions  of  the  employers  have 
been  growing  most  rapidly,  from  28  per  cent  of  the  income 
in  1885  to  45  per  cent  in  lyor,  while  the  workingman's  share 
has  decreased  from  /2  per  cent  to  38  per  cent. 

Thus  the  employers,  and  to  a  much  smaller  extent  the 
state,  were  forced  by  Germany's  legislation  to  contribute 
large  sums  to  the  comfort  and  happiness  of  the  whole  work- 
ing people.  A  wanton  and  arbitrary  process  of  confiscation 
it  has  been  called  by  some,  while  others  are  more  inclined 
to  look  upon  it  in  the  nature  of  a  paj'ment  of  an  old  and 
just  debt.  It  must  be  noticed  that  the  objections  are  much 
louder  outside  of  Germany  than  among  the  German  employ- 
ers, the  majority  of  whom  have  gradually  come  to  see  the 
justice  of  this  institution. 

The  limited  space  of  this  short  study  absolutely  prohibits 
any  extensive  comparisons  with  other  countries.  The  ex- 
ample of  Belgium  may  be  quoted  briefly  to  show  the  superior- 
ity of  compulsory  as  against  a  voluntary  system  of  insur- 
ance. Sickness  insurance  is  carried  on  by  friendly  societies 
which  are  encouraged  and  assisted  by  the  government.  Not- 
withstanding this,  and  the  highly  developed  spirit  of  coopera- 
tion, the  membership  scarcely  reaches  600,000  or  less  than  9 
per  cent  of  the  population,  while  in  Germany  the  insured 
equal  18  per  cent;  and  though  Belgium  expends  several  mil- 
lion dollars  each  year  in  bonuses  for  small  savings  bank  ac- 
counts, only  about  100,000  workmen  are  members  of  the 
superannuation  fund.  In  view  of  these  conditions  the  Belgian 
government  was  forced  to  grant  temporarily  (until  191 1)   the 


42  SELECTED  ARTICLES 

annual  sum  of  65  francs  ($13)  to  all  the  workmen  over  the 
age  of  65  who  are  in  need,  and  the  number  of  pensioners  has 
passed  200,000. 

One  must,  however,  guard  against  the  mistake  of  idealizing 
conditions.  Criticisms  of  the  compulsory  insurance  system  in 
Germany  are  not  wanting;  but  they  are  directed  against  cer- 
tain provisions  and  the  working  of  the  system  and  much 
less  against  the  principle  itself,  as  even  the  employers  have 
acquiesced  in  it,  though  they  carry  the  heaviest  burden. 

Some  of  those  faults  were  pointed  out  above,  nainely  the 
high  age  limit  of  old  age  insurance  and  the  very  limited  com- 
pensation. A  feeling  is  also  growing  up  that  a  wage  worker 
who  loses  his  health  or  limb  through  no  fault  of  his  own, 
should  not  be  made  to  lose  even  one-third  of  his  income. 
Further  efforts  will  undoubtedly  be  made  to  remedy  this  and 
other  shortcomings.  Compulsory  insurance  has  not  brought 
the  millennium  to  the  German  people.  Nor  was  it  expected. 
It  has  not  even  altogether  destroyed  poverty,  for  it  has  not 
even  touched  upon  one  of  the  main  causes,  which  is  not  sick- 
ness, nor  accident,  but  unemployment.  Several  experiments 
with  insurance  against  unemployment  have  been  made  in 
Swiss  towns,  but  have  met  with  failure.  And  a  coinpulsory 
system  of  state  insurance  against  unemployment  has  never 
as  yet  been  tried.  But  it  would  hardly  be  fair  to  condemn  a 
social  institution  for  not  having  succeeded  in  accomplishing 
something  which  it  never  intended  to  undertake.  In  its  own 
field  the  system  of  compulsory  sick,  accident,  old  age  and 
invalid  insurance  has  proved  more  efficient  and  satisfactory 
than  any  other  practical  measures  directed  toward  the  same 
ends  that  has  ever  existed.  No  greater  praise  can  be  given 
to   an    existing    human   institution. 

Independent.  61:  1475-80.  December  20,  1906. 

Greatest  Life  Insurance  Wrong.     Louis   D.   Brandeis. 

For  the  greatest  of  life  insurance  wrongs — the  so-called 
industrial     insurance — the     Armstrong    Committee    failed     to 


COMPULSORY  fXSURANCE  43 

offer  any  remedy.  And  yet  nearly  three-ftnirlhs  of  all  level 
premium  life  insurance  policies  issued  are  of  this  character. 
On  December  31,  1905,  the  day  after  the  committee  closed 
its  hearings,  there  were  16,872,583  industrial  policies  out- 
standing in  the  United  States.  In  New  York  alone  their 
number  was  then  3,898,810,  and  while  the  committee  was 
sitting,  an  average  of  67,200  such  policies  were  being  issued 
in  that  state  every   month. 

Industrial  insurance,  the  workingman's  life  insurance,  is 
simply  life  insurance  in  small  amounts,  on  which  the  pre- 
miums are  collected  weekly  at  the  homes  of  the  insured. 
It  includes  both  adult  and  child  insurance.  The  regular 
premium  charge  for  such  insurance  is  about  double  that 
charged  by  the  Equitable,  the  New  York  Life,  or  the  Mutual 
Life  of  New  York,  for  ordinary  life  insurance.  In  the  initial 
period  of  the  industrial  policy,  the  premium  rate  rises  to 
eight  times  that  paid  for  ordinary  insurance,  since,  by  a 
clause  which  will  be  found  in  most  industrial  policies,  it  is 
provided  that  if  death  occurs  within  the  first  six  months 
after  the  date  of  the  policy,  only  one-fourth  of  the  face  of 
the  policy  will  be  paid,  and  if  death  occurs  within  the  second 
six  months,  payment  will  be  made  of  only  one-half.  So 
heavy  are  the  burdens  cast  upon  those  least  able  to  bear 
them. 

The  disastrous  result  to  the  policyholder  of  this  system 
of  life  insurance  may  be  illustrated  from  the  following  data, 
drawn  from  Massachusetts  ofificial  reports: 

In  the  fifteen  years  ending  December  31,  1905,  the  work- 
ingmen  of  Massachusetts  paid  to  the  so-called  industrial  life 
insurance  companies  an  aggregate  of  $61,294,887  in  premi- 
ums, and  received  back  in  death  benefits,  endowments  or 
surrender  values  an  aggregate  of  only  $21,819,606.  The  in- 
surance reserve  arising  from  these  premiums  still  held  by 
the  insurance  companies  does  not  exceed  $9,838,000.  It 
thus  appears  that,  in  addition  to  interest  on  invested  funds, 
about  one-half  of  the  amounts  paid  by  the  workingmen  in 
premiums    has   been   absorbed   in    the   expense   of   conducting 


44  SELECTED  ARTICLES 

the  business  and  in  dividends  to  the  stockholders  of  the  in- 
surance   companies. 

If  this  $61,294,887,  instead  of  being  paid  to  the  insurance 
companies,  had  been  deposited  in  Massachusetts  savings 
banks,  and  the  depositors  had  withdrawn  from  the  banks 
an  amotint  equal  to  the  aggregate  of  $21,819,606  which  they 
received  from  the  insurance  companies  during  the  fifteen 
years,  the  balance  remaining  in  the  savings  banks  December 
31,  1905,  with  the  accumulated  interest,  would  have  amounted 
to  $49,931,548.35 — and  this,  altho  the  savings  banks  would 
have  been  obliged  to  pay  upon  these  increased  deposits  in 
taxes  to  the  Commonwealth  more  than  four  times  the 
amount  which  was  actually  paid  by  the  insurance  companies 
on   account   of  the  insurance. 

Perhaps  the  appalling  sacrifice  of  workingmen's  savings 
thru  this  system  of  insurance  can  be  made  more  clear  by  the 
following  illustration: 

The  average  expectancy  of  life  in  the  United  States  of  a 
man  21  years  old  is,  according  to  Aleech's  Table  of  Mortal- 
ity, 40.25.  In  other  words,  take  any  large  number  of  men 
who  are  21  years  old,  and  the  average  age  which  they  will 
reach   is   61%   years. 

If  a  man,  beginning  with  his  21st  birthday,  pays  thruout 
life  50  cents  a  week  into  Massachusetts  savings  banks,  and 
allows  these  deposits  to  accumulate  for  his  family,  the  sur- 
vivors will,  in  case  of  his  death  at  this  average  age  of  61 34 
years,  inherit  $2,265.90  if  an  interest  of  3^  per  cent,  a  3-ear 
is  maintained. 

If  this  same  man  should,  beginning  at  age  21,  pay  thru- 
out his  life  50  cents  a  week  to  the  Prudential  Insurance 
Company  as  premiums  on  a  so-called  "industrial"  life  policy 
for  the  benefit  of  his  family,  the  survivors  would  be  legally 
entitled  to  receive,  upon  his  death  at  the  age  of  6134  3'ears, 
only  $820. 

If  this  same  man,  having  made  his  weekly  deposit  in  a 
savings  bank  for  20  years,  should  then  conclude  to  discontin- 
ue his  weekly  payments  and  withdraw  the  money  for  his 
own  benefit,  he  would  receive  $746.20.     If,  on  the  other  hand. 


COMPULSORY  INSURANCE  45 

having  made  for  20  j'ears  such  weekly  pa3'ments  to  the  Pru- 
dential Insurance  Companj^  he  should  then  conclude  to  dis- 
continued payments  and  surrender  his  policy,  he  would  be 
legally  entitled  to  receive  only  $165. 

So  widely  different  is  the  probable  result  to  the  working- 
man  if  he  selects  the  one  or  the  other  of  the  two  classes 
of  savings  investment  which  arc  open  to  him;  and  yet  life 
insurance  is  but  a  method  of  saving.  The  savings  banks 
manage  the  aggregate  funds  made  up  of  many  small  deposits 
until  such  time  as  they  shall  be  demanded  by  the  depositor; 
the  insurance  company  manages  them  ordinarily  until  the 
depositor's  death.  The  savings  bank  pays  back  to  the  de- 
positor his  deposit  with  interest  less  the  necessary  expense 
of  management.  The  insurance  company  in  theory  does  the 
same,  the  difference  being  merelj-  that  the  savings  bank 
undertakes  to  repay  to  each  individual  depositor  the  whole 
of  his  deposit  with  interest;  while  the  insurance  company 
undertakes  to  pay  to  each  member  of  a  class  the  average 
amount  (regarding  the  chances  of  life  and  death),  so  that 
those  who  do  not  reach  the  average  age  get  more  than  they 
have  deposited  (including  interest)  and  those  who  exceed 
the  average  age  less  than  thej'  have  deposited  (including 
interest). 

It  is  obvious  that  the  community  should  not  and  will  not 
long  tolerate  such  a  sacrifice  of  the  workingmen's  savings 
as  the  present  system  of  industrial  insurance  entails;  for  the 
causes  of  this  sacrifice  are  easily  determined  and  a  remedy 
lies  near. 

The  extraordinary  wastefulness  of  the  present  system  of 
industrial  insurance  is  due  in  large  part  to  the  fact  that  the 
business,  whether  conducted  by  stock  or  by  mutual  com- 
panies, is  carried  on  for  the  benefit  of  others  than  the  policy- 
holders. The  needs  and  financial  inexperience  of  the  wage- 
earner  are  exploited  for  the  benefit  of  stockholders  or  offi- 
cials. The  Prudential  (which  w^as  the  first  American  com- 
pany to  engage  in  the  business)  paj^s  annual  dividends  to  its 
stockholders  equivalent  to  more  than  2ig  per  cent,  upon 
the   capital   actually  paid   in;    the   Metropolitan   dividends   are 


46  SELECTED  ARTICLES 

equivalent  to  28  per  cent,  of  such  capital;  and  stock  in  the 
Columbian  National  Life  Insurance  Company,  a  corporation 
which  commenced  business  but  four  years  ago,  has  risen 
from  par  to  $296. 

But  the  excessive  amounts  paid  in  dividends  or  in  salaries 
to  the  favored  officials  account  directly  for  only  a  small 
part  of  the  terrible  shrinkage  of  the  workingmen's  savings. 
The  main  cause  of  waste  lies  in  the  huge  expense  of  solicit- 
ing insurance,  taken  in  connection  with  the  large  percentage 
of  lapses,  and  in  the  heavy  expenses  incident  to  a  weekly 
collection  of  premiums  at  the  homes  of  the  insured.  The 
commission  of  the  insurance  solicitor  is  from  ten  to  twenty 
times  the  amount  of  the  first  premium.  The  cost  of  collect- 
ing the  premiums  varies  from  one-fifth  to  one-sixth  of  the 
amount  collected.  And  yet  commissions  for  soliciting  and 
collection  are  only  a  part  of  the  expenses.  The  physician's 
fee,  the  cost  of  supervision,  of  accounting  and  of  advertising 
must  all  be  added;  with  the  result  that  no  industrial  policy 
"pays  its  way"  until  it  has  been  in  force  about  three  years. 
In  other  words,  if  the  policy  lapses  before  it  has  been  in 
force  three  years,  not  only  does  the  policy-holder  lose  (ex- 
cept the  temporary  protection)  all  that  he  has  paid  in,  but 
the  company  (that  is  the  persisting  policy-holders)  bears 
a  part — generall}^  the  larger  part — of  the  cost  of  the  lapsed 
policy. 

And  only  a  small  percentage  of  industrial  policies  survive 
the  third  year.  A  majority  of  the  policies  lapse  within  the 
first  year.  In  1905,  the  average  payments  on  a  policy  in  the 
Metropolitan  so  lapsing  continued  little  more  than  six  weeks. 
The  aggregate  number  of  such  lapses  in  a  single  year  reaches 
huge  figures.  In  1905,  1,253,635  Metropolitan  and  951,704 
Prudential  policies  lapsed.  The  experience  of  their  young 
and  energetic  rival,  the  Columbia  National  Life  Insurance 
Companj^  is  even  more  striking.  On  January  i,  1905,  that 
company  had  outstanding  40,397  industrial  policies.  It 
wrote,  during  the  year,  103,466.  At  the  end  of  the  year  it 
had   outstanding  only  63.497;   and  yet,   of  the    143,863  policy- 


COMPULSORY  INSURANCE  47 

Iiolders,    only    699    had    died,    while    79,677    policies — that    is, 
one  hundred  and  fourteen  times  as  many — had  lapsed. 

The  results  of  this  system  of  insurance  establish  conclu- 
sively that,  in  the  conduct  of  the  business,  the  interests  of 
the  insured  are  ignored.  A  life  insurance  company  for 
workingmen  should,  as  to  each  policy-holder,  be  conducted, 
like  a  savings  bank,  as  a  benevolent  institution.  No  one 
should  be  induced  to  take  out  a  policy  unless  it  is  advisable 
for  him  to  do  so  in  the  interests  of  those  whom  he  wishes 
to  protect  by  it.  No  one  should  be  lured  into  becoming  a 
policy-holder.  No  one  should  take  a  policy  unless  he  will 
probably  be  able  and  willing  to  continue  it  in  force.  Further- 
more, economy  in  the  management  of  the  insurance  savings 
is  as  essential  to  satisfactory  results  as  the  economy  on  the 
part  of  the  workingmen,  which  alone  makes  it  possible  to 
pay   premiums. 

The  supporters  of  the  present  system  of  industrial  insur- 
ance declare  that  a  reduction  of  expenses  and  of  lapses  is 
impossible.  They  insist  that  the  loss  to  the  insured  and  the 
heavy  burden  borne  by  the  persisting  policy-holders  from 
lapses,  as  well  as  from  the  huge  cost  of  premium  collection, 
must  all  be  patiently  borne  as  being  the  inevitable  incidents 
of  the  beneficent  institution  of  life  insurance,  when  applied 
to  the  workingman.  It  is  obvious  that  a  remedy  cannot 
come  from  men  holding  such  views — from  men  who  refuse 
to  recognize  that  the  best  method  of  increasing  the  demand 
for  life  insurance  is  not  eloquent  persistent  persuasion,  but 
to  furnish  a  good  article  at  a  low  price.  A  remedy  can  be 
provided  only  by  some  institution  which  will  proceed  upon 
the  principle  that  its  function  is  to  supply  insurance  upon 
proper  terms  to  those  who  want  it  and  can  carry  it,  and  not 
to  induce  working  people  to  take  insurance  regardless  of 
their  real  interests.  To  attain  satisfactory  results  the  change 
of  system  must  be  radical. 

The  savings  banks  established  on  the  plan  prevailing  in 
New  York  and  generally  thru  the  New  England  States  are 
managed  upon  principles  and  under  conditions  upon  which 
alone    a    satisfactory    system    of   life    insurance    for   working- 


48  SELECTED  ARTICLES 

men  can  be  established.  These  savings  banks  have  no 
stockholders,  being  operated  solely  for  the  benefit  of  the 
depositors.  They  are  managed  by  trustees,  usually  men  of 
large  business  experience  and  high  character,  who  serve 
without  pay,  recognizing  that  the  business  of  collecting  and 
investing  the  savings  of  persons  of  small  means  is  a  quasi- 
public  trust,  which  should  be  conducted  as  a  beneficent,  and 
not  as  a  money-making  institution.  The  trustees,  the  officers 
and  the  employees  of  the  savings  banks  have  been  trained 
in  the  administration  of  these  savings  to  the  practice  of  the 
strictest  economy.  While  the  expenses  of  managing  the 
industrial  departments  of  the  jMetropolitan,  the  Prudential 
and  the  John  Hancock  companies  have,  excluding  taxes,  ex- 
ceeded 40  per  cent,  of  the  year's  premiums,  the  expense  of 
management  in  1905  (exclusive  of  taxes  on  surplus)  of  the 
130  New  York  savings  banks,  holding  $1,292,358,866  of  de- 
posits, was  only  0.28  of  i  per  cent,  of  the  average  assets,  or 
I  per  cent,  of  the  year's  deposits;  and  the  $662,000,000  of 
deposits  held  in  1905  in  the  189  Massachusetts  savings  banks 
were  managed  at  an  expense  of  0.23  of  i  per  cent,  of  the 
average  assets,  or   1.36  per  cent,  of  the  year's  deposits. 

Savings  institutions  so  managed  offer  adequate  means  of 
providing  insurance  to  the  workingman.  With  a  slight  en- 
largement of  their  powers,  these  savings  banks  can,  at  a 
minimum  of  expense,  fill  the  great  need  of  cheaper  life  in- 
surance in  small  amounts.  The  only  proper  elements  of  the 
industrial  insurance  business  not  common  to  the  savings 
bank  business  are  simple,  and  can  be  supplied  at  a  minimum 
of  expense  in  connection  with  such  existing  savings  banks. 
They  are: 

First — Fixing  the  terms  on  which  insurance  shall  be  given. 

Second — The  initial  medical  examination. 

Third — Verifying  the   proof   of  death. 

The  first  is  the  work  of  an  insurance  actuary;  and  the 
present  cost  of  actuarial  service  can  be  greatly  reduced 
both  by  limiting  the  forms  of  insurance  policies  to  two  or 
three  standard  forms  of  policy  to  be  uniform  thruout  the 
state,    and    by    providing    for    the    appointment     of    a    state 


COMPULSORY  IXSURANCE  49 

actuary,  who,  in  connection  with  the  insurance  commissioner, 
shall  serve  all  the  savings   insurance  banks. 

The  initial  medical  examination  and  the  verification  of 
proof  of  death  are  services  that  may  be  readily  performed 
for  the  savings  banks  at  no  greater  pro  rata  expense  than 
for   the   existing    insurance    companies. 

The  insurance  department  of  the  savings  banks  would, 
of  course,  be  kept  entirely  distinct  as  a  matter  of  accounting 
from  the  savings  department;  but  it  would  be  conducted  with 
the  same  plant  and  the  same  officials,  without  any  large  in- 
crease of  clerical  force  or  incidental  expense  except  such  as 
would  be  required  if  the  deposits  of  the  bank  were  increased. 
On  the  other  hand,  the  insurance  department  of  savings 
banks  would  open  with  an  extensive  and  potent  goodwill, 
and  under  the  most  favorable  conditions  for  teaching  the 
value  of  life  insurance — a  lesson  easily  learned  when  insur- 
ance is  offered  at  about  half  the  premium  now  exacted  by 
the  industrial  companies.  With  an  insurance  clientele  com- 
posed largely  of  thrifty  savings  banks  depositors,  the  ex- 
pensive house  to  house  collection  of  premiums  could  be  dis- 
pensed with,  and  more  economical  payments  of  premiums 
could  probably  be  substituted  for  weekly  payments.  Indeed, 
it  is  probable  that  the  following  simple,  convenient  and  in- 
expensive method  of  paying  premiums  would,  to  a  large 
extent,  be  adopted,  namelj^  making  deposits  in  the  savings 
department  from  time  to  time,  and  giving,  when  the  policy 
is  issued,  a  standing  order  to  draw  on  the  savings  fund  in 
favor  of  the  insurance  fund  to  meet  the  premium  payments  as 
they    accrue. 

The  safety  of  savings  banks  would,  of  course,  be  in  no 
way  imperiled  by  extending  their  functions  to  life  insurance. 
Life  insurance  rests  upon  substantial  certainty,  differing  in 
this  respect  radically  from  fire,  accident  and  other  kinds  of 
insurance.  Since  practical  experience  has  given  to  the  world 
the  mortality  tables  upon  which  life  insurance  premiums  rest 
and  the  reserves  for  future  needs  are  calculated,  no  life  in- 
surance company  has  ever  failed  which  complied  with  the 
law  governing  the   calculation,  maintenance   and   investment 


so  SELECTED  ARTICLES 

of  the  legal  reserve.  The  causes  of  failure  of  life  insurance 
companies  have  been  excessive  expense,  unsound  investment 
or  dishonest  management.  From  these  abuses  our  savings 
banks  have  been  practically  free,  and  that  freedom  affords 
strong  reason  for  utilizing  them  as  the  urgent  need  arises 
to  supply  the  kindred   service   of  life   insurance. 

In  Massachusetts,  the  proposition  of  permitting  savings 
banks  to  establish  insurance  departments  has  already  taken 
definite  shape.  The  plan  has  been  recently  submitted  to  the 
Recess  Insurance  Committee  of  its  Legislature,  and  many  of 
its  eminent  and  public-spirited  citizens  have  associated  them- 
selves under  the  name  of  Massachusetts  Savings-Insurance 
League,  for  the  purpose  of  securing  the  passage  of  a  per- 
inissive   act. 

Massachusetts  laid  the  foundation  of  America's  admirable 
system  of  savings  banks  by  chartering  in  1816  the  Provi- 
dent Institutions  for  Savings  in  the  Towm  of  Boston.  Massa- 
chusetts established  for  the  world  the  scientific  practice 
of  life  insurance  by  the  work  of  its  great  insurance  commis- 
sioner, Elizur  Wright.  It  seems  fitting  that  Massachusetts 
should  lead  in  another  great  advance  in  the  development 
thru  thrift  of  general  prosperity  by  extending  the  fimctions 
of  savings  banks  to  the  issuing  of  workinginen's  life  insur- 
ance. 

State   Insurance.*    1909.    Chapter   3. 
Frank    W.    Lewis. 

We  are  to  consider  whether  state  insurance — the  insur- 
ance especially  of  workmen,  against  accidents,  sickness,  in- 
validity and  death — are  within  the  proper  and  legitimate  sphere 
of  the  general  attitude  of  the  state  toward  social  legislation. 

Some  of  the  tests  of  the  obligation  of  the  state  in  this 
direction  are  simple:  Would  such  insurance  tend  to  mitigate 
industrial  injustice?  to   distribute   more  justly  and  automati- 

*This  chapter  from  Frank  W.  Lewis's  book  on  State  Insurance 
is  reprinted  by  permission  of  the  publishers,  Houghton,  Mifflin  and 
Company,  Boston  and  New  York. 


COMPULSORY  INSURANCE 


51 


cally,  ill  a  sense,  the  product  of  labor?  to  contribute  toward 
contentment  among  the  industrially  or  economically  weak 
by  making  more  nearly  equal  industrial  opportunity  between 
classes?  Would  it  tend  to  diminish  pauperism  and  extreme 
poverty?  Is  it  practicable  or  possible  to  accomplish  fully 
the  benefits  of  insurance  by  any  individual  efifort?  Does  so- 
ciety need  some  such  measure  for  its  own  well-being?  Is 
it  preeminently  a  suitable  and  legitimate  subject  for  collect- 
ive action? 

The  suggestion  of  government  insurance  against  the  vicis- 
situdes of  life  is  not  a  new  one;  it  has  been  agitated  for  the 
past  fifty  years  in  Germany,  England  and  France.  The 
imperfection  and  inadequacy  of  all  existing  systems  and 
plans  has  been  recognized.  It  has  become  evident  to 
thoughtful  men  that  the  matter  should  not  be  left  entirely 
to  private  initiative  and  management.  It  has  become  the 
accepted  doctrine  that  such  insurance  should  be  under  the 
control  of  the  state,  as  is  shown  by  the  appointment  of 
legislative  and  parliamentary  commissions  and  by  the  ample 
powers   conferred  upon  state   insurance   departments. 

If,  then,  it  is  objected  that  state  insurance  would  be 
paternalistic  and  socialistic,  it  must  be  kept  in  mind  that 
the  paternal  attitude  toward  insurance  has  already  been 
taken  by  every  civilized  state  in  its  assumption  of  supervision 
and  control.  And  it  may  be  fairly  claimed  that  all  insurance 
is  in  its  very  nature  socialistic.  Society,  or  a  definite  section 
or  stratum  of  society,  carries  a  burden  in  behalf  of  its  mem- 
bers which  the  individual  components  cannot  carry.  The 
peril  which  menaces  an  individual  fills  him  with  apprehen- 
sion as  an  individual,  but  he  can  look  forward  to  meeting 
his  share  of  the  danger  as  a  member  of  society  with  com- 
placency. He  does  not  seek  to  evade  a  burden  but  to  re- 
adjust   it. 

Before  men  thought  of  making  provision  for  such  events 
by  contract  it  was  deemed  a  sacred  obligation  among  them 
to  provide  for  the  victims  of  sudden  calamities,  of  accident, 
sickness,    or    death,    as    a    matter    of    humanity    or    Christian 


52  SELECTED  ARTICLES 

charity.      Whether  in   the   form   of  written  hiw  or   otherwise, 
there  has  been  this  universal  sense  of  social  obligation. 

There  is  another  feature  of  the  matter  which  must  be 
considered  when  we  talk  of  the  paternal  aspect  of  govern- 
ment insurance.  A  large  portion  of  the  poverty  and  pauper- 
ism which  prevails  is  traceable  to  the  misfortunes  which, 
overtake  workmen,  for  which  they  have  made  no  provision. 
Precisely  how  large  a  percentage  of  the  whole  may  be 
charged  to  these  causes  it  is  not  material  at  this  stage  to 
discuss.  A  highly  competent  authority,  quoted  elsewhere, 
would  attribute  at  least  a  major  portion  of  all  poverty  and 
pauperism  to  the  misfortunes' which  overtake  the  poor  rather 
than  to  fault.  But  can  any  kind  of  law  be  more  distinctly 
and  more  odiously  paternalistic  than  one  which  levies  upon 
the  property  of  A  to  support  B  as  a  pauper?  which  violently 
takes  from  the  prosperous  to  support  the  destitute?  from 
the  thrifty  for  the  thriftless?  from  the  temperate  and  provi- 
dent to  the  intemperate  and  improvident? 

Now  if  a  system  can  be  devised  under  which  the  work- 
man, as  a  rule,  makes  provision  for  all  the  ordinary  con- 
tingencies of  the  future,  and  whereby  society  is  relieved  of 
a  large  part  of  the  burden  of  pauperism  we  accomplish  a 
certain  end  bj^  a  method  quite  dissimilar,  while  each  method 
is  distinctly  paternal.  It  would  hardly  be  contended  that  a 
law  which  compels  one  man  to  support  another  is  to  be 
preferred  over  one  which  compels  a  man  to  support  him- 
self. 

The  incidence  of  charges  under  a  system  of  government 
insurance  will  be  treated  of  elsewhere,  but  if  we  assume, 
for  the  moment,  that  all  such  charges  are  to  be  borne  by  the 
state,  it  will  readily  be  seen  that  there  is  not  any  additional 
burden  carried — only  a  burden  in  another  form,  whether 
more  or  less  odious  or  irksome.  As  it  is  now,  without  the 
finest  discrimination,  we  pension  one  dependent  and  send 
another  to  the  poorhouse;  we  give  a  badge  of  honor  to  a 
soldier  who  has  served  or  suitered  on  his  country's  battle- 
fields, but  we  brand  with  the  stigma  of  disgrace  the  soldier 
of    industry    who    has    suffered    in    hcaltli    or    in    limb    in    the 


COMPULSORY  INSURANCE  53 

industrial  life  of  his  generation.  Through  a  system  of  state 
insurance  it  is  proposed  that  certain  methods  of  dealing 
with  a  certain  social  prohlem  be  replaced  by  something  not 
more  paternalistic  but  far  more  just;  to  readjust  certain  re- 
lations between  classes  on  more  scientific  and  more  ethical 
foundations. 

Whether  in  the  aggregate,  the  burdens  now  carried  by  so- 
ciety on  account  of  its  unfortunate,  helpless  members  would 
be  diminished  under  the  scheme  proposed  must  be  a  matter 
of  speculation.  It  certainly  would  seem  reasonable  to  hope 
that  under  a  systematic  scheme  of  insurance  against  acci- 
dents, sickness,  and  invalidity  there  would  be  great  economy 
compared  with  present  methods,  admitted  to  be  wasteful 
and  unscientific.  It  would  not  be  optimistic  to  hope  for 
the  gradual  eradication  of  pauperism  and  poverty  under  a 
method  which  leaves  nothing  to  haphazard,  but  scientifically 
anticipates  the  future;  to  look  for  a  more  hopeful  feeling 
among  the  classes  that  find  themselves  hopelessly  drifting 
towards  poverty  and  dependence;  to  look  for  a  great  in- 
crease of  thrift  when  men  themselves  see  that  nothing  is 
left  to  chance,  but  that  they,  under  the  encouragement  of  a 
definite  plan,  are  themselves  making  provision  for  all  the 
vicissitudes  of  the  future;  to  look  for  a  distinct  access  in 
true  manhood  when  the  humblest  and  poorest  workman 
realizes  that  he  is  receiving  a  reserve  of  wages  earned  and 
not  the   odious  dole  of  charity  when  vicissitudes   come. 

It  is  a  trite  saj-ing  that  the  state  cannot  through  legis- 
lation compel  thrift;  to  which  the  statement  should  be  added 
that  the  state  ought  to  encourage  thrift  and  should  put  no 
obstacles  in  its  way.  It  must  be  admitted  by  all  who  study 
the  subject  that  the  state  does  often  encourage  thriftlessness, 
and  nowhere  more  manifestly  than  by  its  poor  laws  and  their 
administration. 

A  system  which  would  tend  to  inspire  hope  rather  than 
despair;  which  would  guarantee  that  the  hard  earned  wages 
of  the  thrifty  would  not  be  levied  upon  to  support  the  im- 
provident; which  would  compel  every  industry  to  bear  its 
own   burdens;   which  would  demonstrate   to   some   degree  by 


54  SELECTED  ARTICLES 

infallible  tests  something  as  to  the  true  share  of  labor  in  a 
given  product;  which  would  reveal  in  all  its  nakedness  and 
hideousness  that  predatory  feature  of  many  industries  which 
permits  capital  to  rob  men  of  life,  limb  or  health  in  unhealthy 
and  dangerous  employments  and  turn  over  the  wrecks  to  the 
care  of  society, — a  system  which  would  promise  to  accom- 
plish these  ends  or  a  part  of  them  is  worthy  the  careful 
attention  of  philanthropists  and  statesmen. 

Judgment  might  be  challenged  quite  confidently  upon 
the  proposition  that  insurance  such  as  is  proposed  is  preemi- 
nently within  the  proper  functions  of  a  state.  Let  us  sup- 
pose, if  we  can,  a  civilized  state  whose  policies  have  been 
individualistic  in  the  extreme — a  state  without  public  edu- 
cation, public  highways,  public  control  or  supervision  of 
waterways,  of  health,  of  sanitation;  having  no  care  for  the 
insane  or  the  pauper;  without  a  system  of  state  insurance 
for  workmen.  Imagine  this  state  awakening  to  a  sense  of 
its  social  responsibilities  and  to  the  need  of  social  legislation, 
laying  aside  its  conventional  prejudices  against  collectivism 
and  paternalism,  realizing  that  there  are  many  ends  to 
be  accomplished  which  can  be  reached  onl}^  by  collective 
efifort.  Imagine  it  slowly,  tentatively,  but  with  intelligent 
discrimination,  starting  upon  its  course,  taking  the  step  which 
seems  of  all  the  most  urgent.  ]\Iight  not  this  state  conclude 
that  there  was  no  object  more  imperative  than  the  insurance 
of  workmen;  none  appealing  more  strongly  to  the  paternal 
solicitude  which  the  state  should  have  for  its  weaker  mem- 
bers; none  where  the  best  efforts  of  the  individual  would 
be  so  impotent  and  ineffectual;  that  there  was  nothing  else 
within  the  sphere  of  the  material  needs  of  men,  affecting 
their  protection,  comfort,  peace  of  mind  and  well  being,  for 
collective  means  through  law  promised  more  beneficial  re- 
sults,— results,  however,  which  have  never  been  fully  achieved 
without  the  intervention  of  the  state. 

Assuming,  then,  what  all  are  inclined  to  admit,  that  in- 
surance for  workmen  through  some  agency,  private  or  public, 
is  highly  desirable,  the  grounds  for  state  insurance  would 
seem  to   be  very  strong. 


COMPULSORY  INSURANCE  55 

As  has  been  suggested,  the  end  can  be  achieved  only 
by  some  sort  of  collective  effort;  the  propertyless  individual 
may,  by  slow  accumulation  of  savings,  if  his  wages  admit 
of  it,  make  provision  for  old  age,  but  he  cannot  prepare  for 
the  accident,  sickness,  or  incapacity  that  may  come  without 
warning  tomorrow.  He  looks  for  some  method  or  plan  that 
will  combine  scientific  accuracy,  economy  of  management, 
absolute  safety  and  security,  and  practical  universality. 

The  individual  knows  and  can  know  practically  nothing 
as  to  the  actual  risks  which  menace  him,  judged  by  the  law 
of  averages,  or  what  it  ought  to  cost  him  to  insure  against 
any  hazard  or  class  of  hazards.  The  actuarial  questions  in- 
volved are  difficult  and  intricate,  requiring  the  most  careful 
weighing  of  complicated  statistics.  The  state  is  best  quali- 
fied to  procure  such  statistics  with  economy  and  accurac}^ 
and  to  prepare  reliable  tables  of  morbidity  and  mortality;  it 
may  also  construct  minute  tariffs  of  risks,  as  has  been  done 
under  German  laws.  The  state  is  already  partially  equipped 
for  such  work,  and  procures  for  other  purposes  a  considerable 
portion  of  the  data  required.  No  other  agency  or  source 
of  information  would  command  as  great  confidence  as  the 
bureau  of  a  well  regulated  state.  It  ma}^  too,  be  fairh' 
claimed  that  the  state  is  peculiarly  adapted  to  the  administra- 
tion of  insurance  and  the  calculations  required,  as  they  are 
largely  matters  of  mere  mechanical  routine.  The  workman 
needs  to  have  the  cost  of  insurance,  in  its  various  forms, 
authoritatively  stated,  and  to  procure  it  at  the  minimum  of 
cost.  Thousands  are  today  dissuaded  from  taking  insurance 
because  they  realize  that"  they  must  pay  for  it  excessive 
rates.  A  competitive  system  with  its  enormous  reduplication 
of  solicitation,  exists  at  the  expense  of  the  insured  and  bears 
most  heavily  on  those  most  needing  insurance  and  least  able 
to  bear  anj^  unnecessary  burdens.  The  state  can  provide 
for  insurance  at  the  very  minimum  of  cost.  Much  of  the 
work  required  could  be  brought  under  existing  insurance 
departments  and  municipal  machinery.  There  would  be 
no  hordes  of  solicitors,  all  of  whom  must  earn  a  living;  no 
extravagant!}'    paid    officials;     no    palatial    oflices    or    costly 


S6  SELECTED  ARTICLES 

buildings;  no  corruption  funds  to  control  elections  or  legisla- 
tures. 

There  is  no  subject  that  engages  the  thoughts  of  men, 
involving  the  payment  of  money  or  the  investment  of  funds, 
over  which  there  is  greater  solicitude  as  to  safety  and  se- 
curity than  that  of  insurance  against  the  vicissitudes  of  life. 
For  this  feeling  there  are  powerful  reasons.  Insurance 
against  accidents,  sickness,  invalidity  and  death  concerns 
the  most  serious  and  important  aspects  of  human  affairs. 
If  the  insurer  fails  to  perform  his  part  of  the  contract,  the 
loss  may  be  irreparable  or  worse  than  irreparable, — the  in- 
jured may  not  only  have  lost  the  funds  invested,  but  through 
advancing  age  or  diminished  earning  capacity  he  may  have 
become  unable  to  reinsure;  the  contract,  if  for  an  old-age 
pension,  is  to  be  carried  out  often  at  a  far  distant  day,  per- 
haps after  an  interval  of  fifty  years;  if  the  contract  is  for 
life  insurance  it  is  indefinite  in  its  duration,  but  its  adjust- 
ment, after  the  death  of  the  insured  must  be  effected  by 
others.  But  the  contract  of  the  state  offers  absolute  safety 
and  security;  no  incompetency,  extravagance,  or  dishonesty 
of  officials  can  impair  the  solemnity  of  its  guaranty;  through 
all  ordinary  mutations  in  financial  and  political  affairs  the 
state  must  endure;  if  it  makes  a  contract  today  to  be  ful- 
filled in  the  indefinite  or  far  distant  future,  the  party  inter- 
ested relies  upon  its  promises  with  serene  confidence.  The 
state  may  offer  this  absolute  security  without  the  accumula- 
tion of  any  reserve;  with  the  introduction  of  compulsion  all 
necessity  for  a  reserve  disappears. 

The  prudent  man  who  makes  provision  for  the  future  by 
accumulations  of  savings  or  by  insurance,  and  the  taxpayer, 
have  a  distinct  interest  in  the  thrift  of  others.  They  want 
some  assurance  that  the  state  will  not  take  from  them  by 
force  a  portion  of  their  savings  or  property  for  the  support 
of  the  improvident.  No  insurance  can  be  deemed  satis- 
factory or  successful  which  is  not  general  in  its  application, 
viewed  either  from  the  standpoint  of  the  individual  <St  of 
society.  There  is  contagion  in  thrift  as  well  as  in  thriftless- 
ness,  and  no  system  of  insurance  can  be  highly  successful  or 


COMPULSORY  INSURANCE  57 

beneficent  in  its  results  which  does  not  command  the  con- 
currence of  all.  The  fatal  weakness  of  every  system  which 
has  ever  been  devised  without  the  intervention  of  the  state 
consists  in  its  failure  to  reach  those  for  whom  it  would  be 
especially  prescribed,  those  who  constantly  threaten  to  be- 
come a  public  charge  or  to  pass  a  portion  of  their  lives 
in   extreme  penury  and  wretchedness. 

Some  of  the  objections  that  are  urged  against  govern- 
ment insurance  have  been  anticipated.  It  is  sometimes  urged 
as  an  important  objection  that  state  insurance  would  injure 
or,  if  made  exclusive,  ruin  existing  companies.  This  arises 
from  a  misapprehension.  Existing  insurance  companies  or 
institutions  do  not  exist  for  their  own  sake,  but  for  the  sake 
of  the  policy-holder.  No  policy-holder  would  suffer  harm 
if  no  further  policies  should  be  issued.  Perhaps  he  might 
even  be  benefitted  because  his  accumulations  could  not  be 
used — as  they  often  have  been — to  secure  new  business.  The 
solvent  company  can  meet  all  its  obligations  to  its  policy- 
holder; beyond  that  he  has  no  interest  unless  of  a  purely 
sentimental  nature.  It  has  been  urged,  even,  that  state 
insurance  should  be  opposed  because  it  would  interfere  with 
the  employment  of  insurance  solicitors.  On  one  occasion, 
when  the  Canadian  Government  had  the  subject  under  seri- 
ous consideration,  it  was  indignantly  asked:  "Why  should 
Government  take  the  bread  from  the  mouths  of  the  people 
who  are  earning  their  living  by  life  insurance?"  This  is 
quoted  with  approval  as  a  strong  argument  against  govern- 
ment insurance,  but  it  is  too  puerile  to  waste  time  over.  All 
of  the  legitimate  work  of  insurance  will  remain  to  be  done 
under  any  system.  Whatever  is  beyond  that  is  superfluous 
and  simply  parasitic.  Society  cannot  be  asked  to  support 
a  body  of  men  whose  Itibors  have  no  real  efficiency  and  do 
not  add  to  a  desirable  product.  To  state  the  question  is  to 
answer    it. 

If  state  insurance  is  desirable,  should  it  be  voluntary  or 
compulsory?  Compulsory  insurance  is  sometimes  denounced 
as  though  the  proposition  were  exceptional  in  the  considera- 
tion of  proper  functions  of  government.     The  word  compul- 


S8  SELECTED  ARTICLES 

sion,  as  applied  to  legislation  is  an  odious  one.  Why  should 
the  state  invade  the  domain  of  the  individual's  choice  and 
peremptorily  decide  how  he  shall  meet  his  own  responsi- 
bilities? 

It  is  to  be  premised  that  there  is  no  compulsion  upon 
the  willing.  The  law-abiding  citizen  is  not  conscious  of  any 
restraint  under  laws  against  disorder  or  crime;  the  thoughtful 
citizen  does  not  resent  the  laws  or  regulations  which  require 
him  to  do  that  which  they  should  cheerfully  unite  in  doing 
for  the  common  good.  We  are  accustomed  by  the  long 
practice  of  civilized  nations  to  a  great  variety  of  laws  which 
are  made  obligatory  for  the  benefit  of  all.  We  have  com- 
pulsory education,  compulsory  sanitary  and  quarantine  regu- 
lations, compulsory  requirements  respecting  the  spread  of 
noxious  insects  and  plants,  compulsory  contributions  for  the 
support  of  the  poor.  These  all  rest  lightly  on  the  orderly 
and  patriotic  citizen;  rather  he  looks  upon  the  state  as  highly 
beneficent  which  secures  to  him  all  of  the  privileges  which 
can  be  secured  only  by  establishing  uniformit}^  of  action 
by  law  for  the  general  weal.  He  does  not  feel  the  tyranny  of 
law,  but  realizes  his  ideals  of  liberty  which  can  be  gained 
only  under  law.  He  complies  with  laws  in  the  consciousness 
that  all  of  his  neighbors,  including  the  exceptional  one  who 
is  unwilling,  are  doing  the  same  in  the  interests  of  orderly 
government.  He  knows  how  impotent  he  would  be  alone 
or  even  with  the  unorganized  concurrence  of  his  fellows 
in  gaining  these  results.  We  think  of  compulsion  as  a  sort 
of  tyranny,  but  it  can  only  be  the  tyranny  of  a  majority 
in  a  republic.  This  may  be  odious,  but  less  so  than  the 
tyranny  of  a  minority.  A  minority  despicable  in  point  of 
numbers,  five  per  cent  or  two  per  cent  of  a  community,  inay 
by  mere  inertia  impose  its  will  upon  the  majority  as  long 
as  the  will  of  the  majority  is  not  enacted  into  law.  The  state 
should  not  invoke  compulsion  for  trivial  reasons;  but  when 
large  interests  are  involved,  concerning  the  welfare  of  the 
greater  portion  of  its  inhabitants,  and  a  desired  end  can  be 
accomplished  onlj^  through  compulsion,  it  ought  not  to  hesi- 
tate. 


I 


COMPULSORY  INSURANCE  59 

Is  the  insurance  of  workmen  of  such  importance  and 
urgency  as  to  justify  compulsion  on  tiie  part  of  tlie  state 
to  secure  it  effectively?  Such  insurance  cannot  be  made 
general  in  its  application  without  compulsion.  No  form  of 
persuasion  could  be  effectively  emploj'ed  I)y  the  state  which 
would  not  involve  features  far  more  objectionable  than  com- 
pulsion. As  long  as  any  scheme  is  entirely  voluntary  it  will 
be  evaded  by  the  person  and  the  class  who  most  need  in- 
surance; the  evasion  of  one  would  weaken  those  nearest  him 
socially  and  the  contagion  of  improvidence  would  spread  to 
the  thrifty.  Any  plan  for  state  insurance,  purely  voluntary, 
would  show  in  its  operation  the  same  defects  which  make 
all  existing  insurance  institutions  unsatisfactory.  But  it 
might  be  confidently  expected,  even  if  there  had  been  no 
demonstration  of  the  fact  elsewhere,  that  compulsory  in- 
surance, when  fully  understood  and  appreciated,  would  re- 
sult in  the  ready  acquiescence  of  those  concentrated,  as  has 
been  the  case  of  many  other  obligatory  laws.  Only  the  ex- 
ceptional man  would  chafe  under  the  compulsor)^  feature.  It 
would  hardly  be  compulsory  except  in  name.  It  is  impracti- 
cable for  the  state  in  its  legislation  to  consider  the  one  man 
who  is  abnormal  and  must  be  forced  to  do  that  which  the 
other  ninety-nine  do  gladly.  If  he  were  to  be  heard  we 
should  have  no  public  education  worth  the  name.  His 
inertia   would  always  retard  human  progress. 

It  has  been  suggested  that  a  system  of  compulsorj-  in- 
surance would  and  ought  to  incur  the  opposition  of  work- 
men. To  some  extent  this  was  the  attitude  of  German  work- 
men twenty-five  years  ago  towards  the  scheme  of  Bismarck, 
especially  of  those  who  were  under  the  influence  of  the 
extreme  socialists.  The  most  plausible  ground  for  such 
opposition  is  that  it  would  tend  to  introduce  a  line  of  social 
demarcation.  But  this  position  will  not  bear  scrutiny,  either 
as  a  matter  of  sound  theory  or  as  an  appeal  to  experience. 
Lines  of  social  demarcation  are  most  effectively  established 
by  conditions  of  industrial  inequality  between  classes.  As 
long  as  there  is  economic  dependence,  there  must  be  a  lack 
of  mutuality  in   industrial  relations;  there  will  be   a  tendency 


6o  SELECTED  ARTICLES 

towards  arrogance  on  one  side,  and  undue  humility,  even 
servility,  on  the  other.  Whatever  ministers  to  equality  of 
opportunity  tends  to  efface  social  distinctions.  To  secure  the 
higher  independence  of  the  individual  through  social  legis- 
lation is  to  make  a  stride  towards  genuine  democracy. 

The  lack  of  mutuality  is  a  productive  cause  of  friction  be- 
tween classes.  As  might  have  been  expected,  the  German 
sj'steni  of  insurance  has  contributed  to  a  better  feeling. 

The  workman,  as  well  as  the  state  to  which  he  belongs, 
is  deeply  interested  in  his  own  efficiency,  not  only  considered 
in  the  abstract  but  as  related  to  the  efficiency  of  competing 
nations.  If  a  system  of  universal  insurance  by  creating  or 
intensifying  solicitude  for  the  life,  the  health,  and  the  physi- 
cal well-being  of  the  workman  thereby  increases  his  in- 
dustrial efficiency,  it  is  a  personal  as  well  as  a  social  eco- 
nomic gain,  and  gives  assurance  that  he  is  not  to  be  at  a  dis- 
advantage in  an  industrial  competition  which  is  world-wide. 
"No  one  can  doubt  that  the  general  well-being  of  the  work- 
ing classes  in  Germany,  which  is  strikingly  visible  to  the  eye 
and  confirmed  by  statistics  in  spite  of  many  unfavorable 
circumstances,  is  in  a  large  measure  due  to  the  insurance 
system." 

Further  proof  of  the  beneficence  of  the  German  work- 
men's insurance  is  furnished  in  the  fact  that  it  today  com- 
mands the  almost  universal  acquiescence  of  workmen.  There 
are  criticisms,  but  they  look  for  amendment,  enlargement  and 
improvement,  not  repeal. 

North  American  Review.   195:  630-40.  May,  1912. 

Dangers    of   State   Insurance.      Hugh    Hastings. 

As  a  student  for  years  of  labor  the  writer  recognizes  the 
tendency  of  the  times  to  compel  the  master  by  law  to  com- 
pensate an  injured  employee  for  loss  of  time  and  to  pay 
an  adequate  sum  to  those  dependent  upon  such  employee 
whose  death  has  been  caused  through  accident,  whether  by 
negligence   chargeable   to   his    employer   or   not. 


COMPULSORY  INSURANCE  6i 

Until  within  a  few  years  it  has  been  an  almost  universal 
custom  among  employers  to  do  what  each  one  considered 
equitable  in  such  cases,  with  preference  shown  to  employees 
long  in  service  over  those  of  more  recent  date.  In  fact, 
each  accident  was  adjudged  by  the  employer  according  to 
surrounding  conditions  and  to  the  individual  idea  of  what 
was   proper  and  just. 

The  comparatively  small  number  of  legal  actions  brought 
by  injured  employees  against  employers  to  recover  damages, 
as  shown  by  court  records  of  twenty  years  ago,  speaks  well 
for  the  emploj-er  of  those  days.  But  times  and  methods  have 
changed.  Business  enterprises  have  grown  so  vast  that  no 
longer  the  employer  can  maintain  the  personal  relationship 
with  all  his  emploj^ees  that  was  practicable  forty  or  even 
twenty  years  ago,  nor  can  he  by  any  possibility,  because  of 
the  constant  shifting  requirements  of  business,  find  it  feas- 
ible to  undertake  that  direct  personal  interest  in  every  man 
and  woman  that  is  injured  in  his  employ.  It  was,  there- 
fore, eminently  proper  and  right  that  the  law  should  step  in 
and  define  the  relationship  betw^een  master  and  servant.  No 
fair-minded  eliiploj^er  objects  to  a  negligence  law  that  is 
just  to  both  parties.  The  employee  naturally  demands  the 
law  that  contains  provisions  most  favorable  to  his  interests. 
The  employer,  however,  must  sedulousl}"  consider  the  law 
from  another  standpoint.  It  is  he  who  must  arrange  that 
the  burden  of  compensation  or  damage  paid  to  emplo3'ees 
for  injuries  sustained  shall  not  exceed  the  profits  of  the 
business,  but  still  leave  a  fair  remuneration  for  either  stock- 
holder or  individual  whose  money  is  invested. 

From  the  moment  the  employer  is  inspired  to  investigate 
the  subject  in  order  to  determine  for  himself  what  law, 
either  past,  present,  or  contemplated,  is  the  best  suited  for 
his  particular  kind  of  employment  and  undertakes  to  absorb 
all  the  literature  and  bibliography  accessible,  he  is  hopelessly 
lost.  He  finds  that  to  attempt  to  interpret  the  Sherman  anti- 
trust law  and  to  instruct  the  United  States  Supreme  Court 
to  define  that  simple  document  is  child's  play  compared 
with    trying   to    construct   in    his   own   mind    a   compensation 


62  SELECTED  ARTICLES 

law  that  is  equitable  and  fair  and  will  give  satisfaction  to 
all  parties  concerned. 

Let  us  take  one  look  at  what  has  already  been  accom- 
plished in  the  waj-  of  law-making  on  this  subject  and  ex- 
amine the  laws  that  the  following  countries  are  now  enforc- 
ing, called  in  general  terms  beneficial  laws  for  occupational 
injuries:  England,  France,  Germany,  Austria,  Belgium,  Den- 
mark, Norwa3%  Italy,  Finland,  Flolland,  Sweden,  and  New 
Zealand. 

In  the  L^nited  States  very  recent  legislation  on  the  sub- 
ject has  been  adopted  in  New  York,  New  Jersey,  Vermont, 
New  Hampshire,  Massachusetts,  Ohio,  Illinois,  Wisconsin, 
Indiana,  Kansas,  and  Washington.  Between  foreign  coun- 
tries and  the  enactments  in  our  own  states  it  is  presumptive 
that  every  form  of  law  may  be  found,  good,  bad,  and  in- 
different, that  the  human  mind  is  capable  of  framing,  no  two 
of  them  alike,  each  containing  merit  or  demerit  equalh-, 
each  appealing  one  moment  and  repelling  the  next,  until  the 
task  of  separating  the  wheat  from  the  chaff  and  formulating 
a  law  that  will  partially  solve  the  problem  seems  almost 
hopeless.  The  best  that  can  be  done  will  hardlj-  pass  muster, 
but  if  with  the  material  at  hand  an  expedient  can  be  ar- 
ranged temporarily  to  bridge  the  gulf  between  employer 
and  employee  with  a  minTmum  of  harm  to  both,  until  time 
has  elapsed  to  perfect  a  completed  experience  over  a  five 
years'  period  basis,  a  long  step  toward  solving  this  intricate 
problem  will  have  been  accomplished. 

The  laws  governing  compensation  to  injured  employees 
in  foreign  countries  may  be  separated  into  two  classes; 
"simple  compensation,"  the  English  form,  and  "compulsory 
insurance"  either  by  state  or  mutual  associations.  Care- 
ful stud}'  and  mature  deliberation  eliminate  comment  upon 
foreign  laws  with  the  exception  of  those  in  force  in  Eng- 
land, Germany,  and  Norway,  which  are  considered  by  pro- 
found students  as  the  best  of  their  kind  in  force. 

More  has  been  written  of  the  German  method  than  that 
of  any  other  country,  and  it  is  the  general  impression  of 
employers  of  labor  and  of  thorough  students  of  this  subject 


COMPULSORY  INSURANCE  63 

that  the  German  method  has  proved  an  unqualified  success 
and  would  work  equally  well  if  transplanted  to  our  shores. 
But  a  literal  analysis  of  that  law  and  exhaustive  study  of 
the  statistics  prepared  by  the  Government  by  no  means 
justify  the  contention  of  its  success  in  or  adaptability  for 
this  country.  The  main  objection  to  the  system  is  based 
upon  the  fact  that  it  is  compulsory  insurance  in  mutual  as- 
sociations composed  of  all  the  employers  in  any  y'^en  line 
of  trade  and  vested  with  power  to  regulate  and  control  their 
members.  Through  this  system  of  control  it  is  possible  in 
Germany  to  make  a  flat  rate  of  premium  applicable  to  all 
employers  in  any  given  line  of  trade,  for  it  must  not  be 
forgotten  that  this  compulsory  insurance  serves  two  ob- 
jects: first,  to  prevent  accidents,  and,  second,  to  compensate 
for  accidents  that  are  inevitable. 

The  control  of  manufacturing  plants  by  trade  associations 
has  brought  about  a  high  level  of  safety  in  all  establish- 
ments. But  while  trade  regulations  and  the  laws  providing 
safety  for  employees  are  rigidly  enforced,  tines  were  im- 
posed and  collected  by  ti-ades  associations  in  1908  amount- 
ing to  412,608.51  marks  to  compel  delinquent  members  to 
perform  their  legal  duties.  In  spite  of  this  regulation  and 
inspection,  the  statistical  details  prepared  by  Actuary  Mile^ 
AI.  Dawson  show  that  between  1886  and  1908  it  was  found 
necessary  to  raise  the  rates  of  premium  in  certain  cases 
five  hundred  per  cent,  over  the  rate  for  1886.  And  the  end 
is  not  yet,  according  to  the  testimony  of  Actuar}'-  Dawson 
before  the  Congressional  Employers'  Liability  and  Work- 
men's Compensation  Commission.  It  is  quite  likelj',  Air. 
Dawson  declares,  rates  would  continue  to  be  increased  for 
a  period  of  fifty  years  from  1886,  when  the  law  first  went 
into  effect,  before  a  level  would  be  established.  In  other 
words,  a  new  enterprise  started  in  Germany  during  the 
year  191 1  would  be  forced  to  pa\'  its  pro  rata  share  in  the 
class  to  which  it  belonged  for  all  accidents  happening  be- 
tween 1886  and  1912  that  remained  to.  be  adjusted  or  upon 
which  payments  are  still  to  be  made  over  a  period  of  years 
for  those  dependent  on  employees  killed  in  service  and  those 


64  SELECTED  ARTICLES 

totally  incapacitated  who  are  pensioners  of  this  fund  until 
death.  As  an  example  of  increase  in  rates:  the  rate  on 
machine  and  repair  shops  was  thirty-two  cents  per  $ioo  of 
pay-roll  in  1886  and  $1.69  per  $100  of  pay-roll  in  1908.  Steel 
castings  from  forty  cents  to  $2.03,  and  blast-furnaces  from 
forty  cents  to  $2.64,  and  so  on  through  the  list.  We  must 
also  bear  in  mind  that  these  rates  only  provide  for  serious 
accidents,  as  minor  accidents,  when  loss  of  time  does  not 
exceed  thirteen  weeks,  are  taken  care  of  from  a  sick  fund. 

In  this  country  there  are  no  trade  associations  that  pos- 
sess the  power  to  enforce  safety  regulations  throughout 
any  given  trade,  nor  to  my  knowledge  is  there  any  state 
in  the  Union  where  the  laws  that  provide  safety  appliances 
for  workmen  are  rigidly  enforced,  for  the  reason  that  the 
state  has  failed  to  provide  the  machinery  to  enforce  its  laws 
Admitting  that  this  is  so,  the  baneful  hand  of  the  politician 
would  soon  appear  in  evidence  for  the  conifort  and  profit 
of  the  man  with  a  pull  who  would  be  relieved  of  the  re- 
sponsibility that  would  be  imposed  upon  the  man  without  a 
pull.  A  flat  rate  of  premium  through  any  given  line  of  in- 
dustry could  only  result  in  monetary  punishment  to  the 
well-ordered  establishment  and  a  bonus  allowed  to  the  run- 
down, obsolete,  and  badly  managed  establishment.  No  less 
an  authority  than  Privy-Councilor  Ferdinand  Friedensburg, 
late  president  of  the  senate  of  the  German  Imperial  In- 
surance Office  that  enforces  the  law,  declares  the  system  is 
a  "costly,  inefficient,  and  demoralizing  failure." 

Another  grave  defect  in  the  law  is  that  no  provision  is 
made  by  the  Trades  Association  for  taking  from  the  insured 
a  pension  obtained  fraudulently  or  unjustly  granted,  although 
a  rehearing  is  conceded  when  the  claimant  becomes  dissatis- 
fied. In  consequence,  such  rehearings  are  increasing  and 
frequently  result  in  an  inflated  pension. 

A  system  of  insurance  regulated  not  only  by  the  govern- 
ment, but  by  the  trades  themselves,  that  has  proved  a  hot- 
bed of  corruption,  malingering,  and  fraud  requiring  a  tre- 
mendous and  expensive  organization  to  handle,  involving 
an   increase   in   rates   in    some    instances   of    five   hundred   per 


COMPULSORY  INSURANCE  65 

cent,  in  twenty  years,  would  not,  from  the  standpoint  of 
an  American  manufacturer,  be  considered  a  success  or  meet 
with  the  endorsement  of  either  workmen  or  employers. 
Therefore,  the  German  system  should  ])e  dismissed  without 
further  consideration. 

Let  us  now  consider  briefly  compulsory  state  insurance 
as  illustrated  by  Norway  and  the  state  of  Washington  in 
the  United  Stated,  the  latter  operating  under  a  law  largely 
copied  from  that  of  Norway. 

It  is  generally  conceded  that  the  management  of  the  Nor- 
wegian Insurance  Office  is  exceptionally  good  and  that  the 
experience  under  the  Norwegian  system,  so  far  as  known, 
has  been  generally  favorable.  It  must  be  borne  in  mind, 
however,  that  the  conditions  in  Norway  may  justify  a  trial 
of  state  insurance  because  of  the  peculiar  advantages  of- 
fered. Onl}^  a  small  percentage  of  Norway's  two  million 
two  hundred  thousand  persons  are  engaged  in  industries 
covered  by  this  insurance,  and  most  of  these  are  of  the  same 
nationality,  while  the  changes  of  employees  in  the  dift'erent 
establishments  represent  a  very  small  percentage  of  the 
number  employed. 

Unrest  and  dissatisfaction  with  conditions  of  employment 
result  not  only  in  accidents,  but  in  strikes.  But  no  more 
remarkable  illustration  of  the  Norwegian's  apparent  con- 
tentment and  satisfaction  can  be  cited  than  the  strike  of 
the  iron  and  metal  workers  in  1903,  the  greatest  labor  con- 
flict on  record  till  1910,  and  yet  this  strike  involved  only 
1,052  employees.  Politics  appear  to  have  little  or  no  in- 
fluence over  the  conduct  of  the  Insurance  Office.  Even  with 
these  ideal  conditions  surrounding  this  scheme  of  insurance 
and  under  efficient,  capable,  and  experienced  management, 
with  rates  approximately  the  same  as  those  charged  in  Eng- 
land, a  few  years'  experience  has  shown  that  they  had  not 
reserved  sufficiently  to  cover  accrued  liabilities  and  were 
obliged  to  make  good  a  deficiency  of  $100,000  that  had  to  be 
paid  as  a  general  tax  upon  the  government.  If  New  York 
state  were  operating  under  the  laws  of  Norway  this  de- 
ficiency  would   have   been   not   $100,000.    but    several   millions 


66  SELECTED  ARTICLES 

of  dollars,  owing  to  the  greater  population  and  the  increased 
number  of  employees  insured,  and  this  additional  burden  of 
several  millions  of  dollars  would  have  to  be  paid  by  a  direct 
tax  upon  the  state  of  New  York  as  a  whole. 

In  order  to  be  successful,  compulsory  state  insurance 
must  be  a  monopoly — that  is,  all  insurance  of  this  nature 
must  be  transacted  through  one  source.  The  state  of  Wash- 
ington has  cleverly  recognized  this  feature,  and  consequently 
monopolizes  workmen's  compensation  insurance  to  itself. 
The  authors  of  the  Washington  law  delight  to  call  it  com- 
pensation, but  it  is  far  from  that.  Because  of  its  meager 
benefits  it  appears  more  in  the  light  of  an  amplified  poor 
law  with  its  object  to  prevent  absolute  pauperism.  It  is 
impossible  to  believe  the  labor  unions  of  the  state  of  Wash- 
ington approved  this  law,  unless  thej^  contemplated  to  en- 
list political  influence  in  order  to  magnify  the  benefits.  As 
a  matter  of  fact,  it  is  unfair  to  consider  the  Washington  law 
as  a  compensation  law.  The  law  fails  to  provide  for  accru- 
ing liabilities,  for  the  proper  machinerj'  to  enforce  it,  or  for 
a  prompt  and  efficient  means  of  compelling  a  recalcitrant 
employer  to  insure  his  men.  The  method  of  establishing 
rates  is  crude  in  the  extreme,  and  their  method  of  apportion- 
ing the  pay-roll  through  a  given  class  at  a  flat  rate  is  still 
worse. 

The  absurdity  of  the  whole  scheme  is  exemplified  by  the 
statement  of  ^Ir.  George  A.  Lee,  Chairman  of  the  Industrial 
Commission  of  the  state  of  W'ashington,  relative  to  the 
claims  for  the  death  of  eight  girls  in  a  powder-mill  explosion 
at  Chehalis,  Washington.  Chairman  Lee  states  that  the 
amount  of  claims  for  these  eight  girls  must,  under  the  law, 
be  paid  by  assessment  levied  on  the  powder  manufacturers 
of  the  state.  It  seems  there  are  but  three  powder  manu- 
facturers in  Washington.  Of  these,  two  paid  the  assessment 
levied  upon  them  by  the  Insurance  Commission  in  accord- 
ance with  their  estimated  pay-roll  and  turned  over  to  the 
state  the  sum  of  $270  as  their  insurance  premium  for  one 
jear.  The  third  manufacturer  refused  to  pay,  maintaining 
that   the   rate  charged  was  excessive   and   that  the  conditions 


COMPULSORY  INSURANCE  67 

safeguarding  his  plant  wore  so  far  superior  that  it  was  un- 
fair to  assess  him  the  same  rate  charged  against  the  other 
two.  The  maximum  amount  which  should  be  collected  from 
the  state  for  this  accident,  according  to  law,  is  $32,000,  but 
the  Attorney-General  has  raised  the  question  that  the  law 
does  not  require  the  payment  of  $4,000  for  the  death  of  a 
minor,  and  it  is  now  for  the  Attorney-General  to  prove,  if  he 
can,  the  economic  value  of  a  minor  as  compared  with  an 
adult.  Before  the  law  had  been  in  effect  sixty  days  the 
Washington  State  Insurance  Commission  found  itself  face  to 
face  with  the  extraordinary  problem  of  paying  a  maximum 
loss  of  $32,000  out  of  the  sum  of  $270  on  hand.  Litigation 
between  the  Insurance  Commission  and  the  Attorney-Gen- 
eral,  with  the  sum  of  $270  premiums  already  collected  to 
draw  upon,  will  doubtless  ensue  to  determine  the  economic 
value  of  a  child.  A  careful  perusal  of  the  published  rates  for 
this  insurance,  with  the  grouping  of  trades  without  any  rela- 
tion one  to  the  other  into  classes  subject  to  a  flat  rate  of 
premium,  discloses  such  a  lack  of  knowledge  of  the  difficul- 
ties, embarrassment,  and  expense  necessary  to  operate  a  law 
of  this  kind  as  to  make  the  system  open  to  ridicule. 

Until  the  litigation  is  settled  and  the  damages  resulting 
from  the  Chehalis  explosion  are  paid  the  state  of  Washing- 
ton certainly  can  oflfer  no  attractions  to  capital  desirous  of 
settling  within  its  boundaries,  with  the  prospect  of  contrib- 
uting pro  rata  into  the  insurance  fund  for  payment  of  claims 
arising  out  of  a  powder-mill  explosion  before  it  entered  the 
state  to  transact  business.  In  view  of  all  these  facts,  it 
would  seem  as  if  it  were  only  a  question  of  time  when 
the  state  of  Washington's  insurance  law  must  be  radically 
amended    or    abandoned. 

Germany  complains  that  in  the  last  year  800,000  marks 
were  taken  to  Italy  bj^  injured  Italian  workmen,  never  to 
return,  and  that  German  workmen  injured  in  Italy  brought 
back  to  the  Fatherland  only  what  was  left  of  themselves  to 
become  an  added  burden  to  the  state.  How  would  the  Ger- 
man law  work  out  in  the  United  States  regarding  Italians? 
Not    marks,    but    dollars — not    marks    by    the    thousand,    but 


68  SELECTED  ARTICLES 

dollars  by  the  million — in  exchange  for  toes,  arms,  legs, 
and  eyes — to  pension  the  transient  Italian  workman  at  the 
expense   of    the   federal    or    state    governments? 

The  English  law  or  Simple  Compensation,  which,  accord- 
ing to  Mr.  Hugh  H.  Lusk,  former  Premier  of  New  Zealand, 
was  taken  almost  bodily  from  the  New  Zealand  statute  after 
it  had  been  in  force  in  that  country  for  live  years,  must  next 
be    considered. 

With  the  changes  and  additions  required  to  meet  con- 
stitutional questions  the  English  law  is  more  adaptable  to 
industrial  conditions  in  the  L'nited  States  than  any  other 
law  now  in  effect. 

Actuary  Dawson,  who  unquestionably  has  spent  more 
time  boring  into  the  question  of  the  various  kinds  of  work- 
men's compensation  laws,  with  more  or  less  prejudice  as- 
sails the  English  law  because  it  was  started  on  what  he  calls 
a  maximum  rate  rather  than  a  minimum  rate  as  was  the  law 
of  Germany.  No  one  will  question  Germany's  credit  for 
starting  at  a  minimum  rate.  Even  Actuary  Dawson  ac- 
knowledges that  after  a  quarter  of  a  century  the  German 
rates  have  not  yet  reached  a  maximum.  Employers  in 
England  generally  carry  their  workmen's  compensation  in- 
surance in  stock  insurance  companies,  and  while  Mr.  Daw- 
son's remarks  would  give  the  impression  that  the  insurance 
companies  have  bled  the  poor,  trusting  English  manufac- 
turer to  the  last  drop  of  his  financial  blood,  and  that  the 
companies  had  feasted  and  grown  plethoric  with  the  great 
excess  of  financial  blood  unnecessarily  squeezed  from  the 
innocent  employer,  insurance  statistics  and  the  record  of 
companies  forced  into  the  hands  of  receivers,  on  account  of 
underestimating  the  premiums  required  to  carry  the  hazard 
of  workmen's  compensation,  utterly  fail  to  bear  out  the  im- 
pressions of  Mr.  Dawson.  He  decries  the  great  evil  of  com- 
muting the  amount  to  become  due  to  permanently  injured 
employees,  on  the  ground  that  the  payment  of  a  lump  sum 
rather  than  payment  at  stated  intervals  over  a  protracted 
period  of  time  quickly  results  in  the  beneficiary  soon  squan- 
dering  or    badly    investing    his    money    to    find    himself    in    a 


COMPULSORY  INSURANCE  69 

short  time  in  a  position  of  absolnte  paui)eri>ni  instead  of 
maintaining  an  income,  no  matter  how  small,  that  is  perma- 
nent. Such  a  result  is,  of  course,  unfortunate,  but  the  law 
that  allows  commutation  has  nothing  to  do  with  it,  for  annu- 
ities can  be  purchased  and  the  courts  that  allow  commuta- 
tion can  easily  direct  a  way  in  which  the  lump  sum  should  be 
protected.  Prodigals  have  existed  certainly  since  Biblical 
times,  and  no  law  has  yet  been  devised  by  man,  civil  or 
criminal,  that  could  absolutely  obliterate  prodigality. 

The  emploj'cr's  side  to  this  question  of  commutation  is 
overlooked  by  IMr.  Dawson;  the  obligation  that  compels 
all  business  men  to  conduct  their  affairs  upon  the  basis  of 
giving  and  taking  credit,  and  with  a  large  number  of  small 
manufacturers  good  credit  is  their  principal  asset.  It  is 
not  only  quite  possible,  but  quite  probable,  that  in  the  course 
of  a  few  years  an  employer  might  be  overwhelmed  with 
a  number  of  uncommuted  indeterminate  claims  from  injured 
employees  as  seriously  to  imperil  his  credit  with  an  un- 
known liability  existing  that  certainly  would  be  remorse- 
lessly scrutinized  at  his  bank  when  application  was  made  for 
the  necessary  credit  and  funds  to  continue  his  business 
operations.  Therefore,  as  a  business  necessitj-  and  for 
personal  protection,  it  is  obligatory  upon  the  employer  to 
clear  his  books  and  settle  his  accounts  with  injured  em- 
ployees  at   the   earliest   possible   moment. 

Speaking  of  the  German  law,  the  same  authority  asserts 
that  the  physical  condition  of  the  German  workmen  has 
been  immensely  improved  by  the  operations  of  the  work- 
men's compensation  law,  that  the  Germans  have  grown 
taller  and  stronger  during  the  period  in  which  this  law 
has  been  in  effect,  and  that  during  the  same  period  the  Eng- 
lish have  grown  shorter  and  weaker.  Is  it  possible  that  Mr. 
Dawson  has  not  been  informed  of  the  improved*  physical 
condition  of  the  German  male  through  enforced  militarj- 
service? 

It  is  also  claimed  by  .several  writers  that  the  German 
compensation  system  has  brought  with  it  peace  and  con- 
tentment  in    industrial   conditions   as   against   unrest   in    Eng- 


70  SELECTED  ARTICLES 

land,  but  as  there  were  in  1907,  2,266  strikes  in  Germany 
affecting  13,092  establishments  and  445,165  employees,  as 
against  601  strikes  and  100,728  strikers  and  locked-out  em- 
ployees in  England  for  the  same  year,  this  claim  cannot 
be    allowed. 

For  the  state  of  New  York  or  any  other  state  in  the 
United  States  the  only  law  that  seems  applicable  for  the 
moment  is  one  of  simple  compensation  as  a  substitute  for 
all  other  remedies  except  the  common-law  right  to  recover, 
through  the  civil  courts,  just  damages  for  the  consequences 
of  wilful  and  unpardonable  negligence.  To  make  this  law  a 
compulsory  one  is  as  repugnant  to  the  idea  of  the  free-born 
American  citizen  as  federal  ownership  of  the  railroads; 
therefore,  while  this  law  should  be  compulsory  in  effect,  it 
should  be  elective  in  fact,  and  each  employer,  while  required 
to  jnsure,  should  be  given  the  choice  of  doing  it  in  the  way 
most  adaptable  to  his  surroundings.  He  should  be  allowed 
to  insure  in  either  a  stock  or  mutual  insurance  company 
duly  qualified  by  the  State  Insurance  Department  to  do 
business  in  his  state,  or  to  put  into  efifect  within  his  own 
organization  a  workmen's  compensation  plan  that  should 
be  not  less  beneficial  to  injured  claimants  than  the  law  pro- 
vides, or  he  should  be  allowed  to  carry  his  own  insurance 
if  he  so  elects.  The  law,  however,  should  provide  that,  if 
an  employer  should  elect  either  of  the  two  last-mentioned 
plans,  he  be  compelled  to  furnish  either  to  the  Insurance 
Department  of  his  state  or  to  some  other  department  or 
designated  ol^cer  of  the  state  a  bond  sufficient  in  amount  to 
cover  the  obligations  imposed  upon  him  by  law  as  regards 
injured  employees. 

It  has  become  a  habit  apparently  of  those  writing  about 
the  rates  charged  for  employers'  liability  and  workmen's 
compensation  insurance  by  stock  companies  to  denounce  the 
companies  from  start  to  finish  and  to  hold  them  up  before 
the  public  for  not  only  robbing  the  employer  on  rates 
charged,  but  for  cheating  the  injured  workmen  out  of  their 
just  dues  by  every  known  means,  driving  him  through  in- 
tricate tangles  of  litigation  until  he  is  willing  to  accept  little 


COMPULSORY  IXSURANXE  71 

or  nothing  for  his  release.  Even  Professor  Henry  R.  Seager, 
of  Columbia  University,  according  to  the  daily  press,  stated 
at  a  recent  lecture  "that  under  the  present  system  there 
is  a  lot  of  unnecessary  litigation  and  that  fifty  per  cent, 
of  the  money  received  is  expended  by  the  employers'  liabil- 
ity companies  in  efiforts  to  keep  from  paying  claims."  Pro- 
fessor Seager  is  correct  in  stating  that  there  is  an  unneces- 
sary amount  of  litigation,  but  so  long  as  shyster  lawyers 
and  ambulance-chasers  are  allowed  to  charge  fifty  per  cent, 
of  the  amount  of  ever}'  recovery  made  through  such  litiga- 
tion for  their  fee,  just  so  long  will  it  continue.  One  of  the 
salient  points  of  the  report  to  Congress  by  the  Committee 
on  Employers'  Liability  and  Workmen's  Compensation  reads 
as  follows:  "Of  the  $10,000,000  annually  paid  by  the  rail- 
roads of  the  country  presumably  to  workmen  and  their  bene- 
ficiaries in  death  and  injury  claims,  $5,000,000,  or  one-half, 
has  been  stolen  by  personal-injury  lawyers."  Professor 
Seager's  statement  that  the  companies  spend  fifty  per  cent. 
of  their  money  to  resist  just  payments  is  not  borne  out  by 
the  facts.  Superintendent  Hotchkiss  of  the  Insurance  De- 
partment of  the  State  of  New  York  states  that,  while  the 
liability  companies  have  made  no  money  in  the  past  three  or 
four  years,  they  have  been  guilty  of  unnecessary  expense 
owing  to  the  severe  competition  for  business  among  them- 
selves; that  it  is  quite  doubtful  if  the  present  Reserve  Law 
of  fifty  per  cent,  of  the  premiums  is  sufficient,  as  the  In- 
surance Department  figures  show  that  the  loss  ratio  on  com- 
pleted experience  is  nearly,  if  not  quite,  sixty  per  cent,  of 
the  amount  of  the  premiums,  and  he  further  calls  attention 
to  the  extravagant  rate  of  commission  paid  to  those  who 
bring  the  business  to  the  companies'  counters.  From  an 
absolutely  authentic  source  the  writer  can  vouch  for  the 
statement  that  the  fifty  per  cent,  referred  to  by  Professor 
Seager  is  made  up  approximately  as  follows;  ten  per  cent, 
legal  expenses,  ten  per  cent,  home  and  branch  office  expenses, 
five  per  cent,  pay-roll  audit  and  inspection  departments,  and 
the  balance  of  twenty-five  per  cent,  to  brokers  placing  the 
business. 


72  SELECTED  ARTICLES 

With  a  workmen's  compensation  law  restricting  the  fees 
of  attorneys,  thus  cutting  out  seventy-five  per  cent,  of  the 
litigation,  everj^  one  of  the  above  mentioned  percentages 
should  be  scaled  down  materially  by  the  liability  companies 
themselves.  Legal,  home  office,  and  miscellaneous  expenses 
should  be  cut  seven  and  one-half  per  cent.,  and  with  every 
employer  carrj-ing  workmen's  compensation  insurance  in 
one  form  or  another  twelve  and  one-half  per  cent,  com- 
mission is  fully  enough  to  pay  to  brokers  or  agents  placing 
the  business.  This  twenty  per  cent,  saving  can  well  be  used 
by  the  employer  to  help  him  to  carry  the  additional  burden 
of  workmen's  compensation  insurance  that  provides  for 
weekly  payments  whether  the  employer  is  guilty  of  negli- 
gence or  not. 

Annals  of  the  American  Academy.  38:  151-8.  July,  1911. 

Compensation   Law  and   Private   Justice. 
P.    Tecumseh    Sherman. 

In  the  states  of  the  civilized  world  there  are  two  systems 
of  employers'  liability  for  accidental  injuries.  The  first, 
which  formerly  prevailed  in  all,  but  which  now  survives  only 
in  the  United  States  and,  in  a  transition  stage,  in  Switzerland 
is  that  of  tort,  or  more  particularly  the  master  and  servant 
branch  of  the  law  of  negligence.  The  second  is  that  of 
"compensation,"  which  embraces  both  "simple  compensation" 
and  also  its  more  complex  form  of  "compulsory  insurance" — 
for  "compulsory  insurance,"  where  and  in  so  far  as  it  is  at 
the  expense  of  employers,  is  in  effect  simply  a  liability  to 
pay  compensation  for  accidental  injuries  to  employees,  with 
a  legal  obligation  added  to  insure  its   payment. 

The  majority  of  the  advocates  of  "compensation"  base 
their  arguments  entirely  upon  reasons  of  social  welfare.  Un- 
der that  line  of  argument,  in  order  to  sustain  a  compensation 
law  under  our  constitutions,  it  is  necessary  to  rely  exclusive- 
ly upon  the  "police  power" — a  power  possessed  by  the  state 
which   permits   it   to   inflict   individual   hardship    and   injustice 


COMPULSORY  IXSURAXXE  73 

where  necessary  for  the  public  welfare.  But  the  law  should 
seek,  wherever  possible,  to  effect  private  justice;  and  the  case 
for  "compensation"  would  be  intinitely  strengthened  and  the 
probability  of  repetitions  of  the  reverse  suffered  in  the  recent 
decision  of  the  New  York  Court  of  Appeals  would  be  di- 
minished if  it  can  be  demonstrated  that  the  liability,  as  be- 
tween master  and  servant,  which  the  compensation  law  im- 
poses, is  just.  In  my  opinion  that  liability  is  just,  not  abso- 
lutely, just  in  theory,  because  it  abandons  the  unattainable 
ideal  of  afifecting  exact  justice  in  each  particular  case,  but  as 
just  as  is  possible  in  practice  and  relatively  most  just  in  com- 
parison with  the  existing  liability  for  negligence.  In  this 
paper  I  shall  endeavor  to  explain  my  reasons  for  that 
opinion;  but  in  order  to  be  brief  and  for  that  purpose  to 
avoid  complexities  from  varying  conditions  I  will  limit  my 
arguments  to  those  which  apply  with  full  force  only  to 
employment  in  the  more  hazardous  organized  industries,  to 
which,  in  my  judgment,  our  first  experiments  in  the  law  of 
compensation   should  be   limited  in  their  application. 

In  my  opinion  the  two  systems  of  employers'  liability  law 
are  not  totally  dififerent  in  their  fundamental  principles  of 
private  right,  but  the  principles  of  the  compensation  law  are 
developments  from  the  principles  of  the  negligence  law,  cor- 
rected to  conform  to  the  lessons  of  experience  and  to  mod- 
ern scientific  knowledge  and  modified  wn"th  a  view  to  con- 
crete as  distinguished  from  abstract  justice.  While  the 
foreign  compensation  laws  are  all  shaped  in  many  of  their 
details,  and  in  some  cases  in  their  entire  forms,  with  a  view 
solely  to  the  general  social  welfare,  nevertheless  as  a  sys- 
tem it  will  be  found  that  the  principles  of  private  justice 
underlie  them  all.  If  this  view  is  sound  and  if  those  princi- 
ples of  private  justice  become  generally  accepted  here,  then 
the  substitution  of  the  liability  for  compensation  in  the  place 
of  the  existing  liability  for  negligence  would  be  in  accord 
with,  instead  of  being  a  departure  from,  the  spirit  of  our 
common  law  and  of  the  principles  of  the  Bill  of  Rights 
in    our   constitutions. 

The  compensation  law,  as  a  rule  of  private  justice,  dilYers 


74  SELECTED  ARTICLES 

from  the  law  of  negligence  in  principle  in  that  it  changes  the 
rules  of  "contributory  negligence,"  of  "assumption  of  risks" 
and  of  "fellow  servant,"  the  criterion  of  "negligence"  and  the 
rules  governing  the  burden  of  proof — and  in  that  it  fixes  a 
definite  and  limited  measure  of  the  amount  of  the  liability. 

Our  rule  of  "contributory  negligence"  is  peculiar  to  the 
common  law,  and  there  are  now  few  who  believe  in  its 
justice.  But  although  the  rule  may  be  unjust,  yet  simply 
to  abolish  it  and  to  make  the  employer  liable  for  full  dam- 
ages, as  if  there  had  been  no  contributory  negligence,  would 
be  equally  unjust,  because  that  would  merely  shift  the  in- 
justice from  the  workman  to  the  employer.  The  proper 
correction  is  to  divide  the  damages.  That  is  what  the  Ad- 
miralty and  the  civil  laws  have  always  done,  and  what  the 
compensation   law   in    effect    does. 

The  justice  of  the  "assumption  of  risks"  rule  is  predicated 
upon  the  premises  that  workmen  are  free  to  assume  or  reject 
hazardous  employmnt,  and,  consequently,  that  when  they 
accept  such  employment,  they  should  be  deemed  to  contract 
freely  to  assume  its  risks;  and  that  wages  in  hazardous  em- 
ployments are  higher  in  proportion  to  the  hazard  so  as  to 
compensate  for  such  risks.  But  facts  demonstrate  that 
working  people  in  the  mass  are  not  economically  free  to 
accept  or  reject  hazardous  employment,  and  that  wages  are 
not  at  all  in  proportion  to  risks.  Therefore,  the  premises 
upon  which  the  rule  of  assumption  of  risks  is  based  are  gen- 
erally false,  and  the  rule  itself  is  not  a  true  rule  of  justice. 
But  if  justice  requires  the  abandonment  of  the  assumption 
of  risks  rule,  its  corollary,  the  fellow  servant  rule,  .should 
also  be  abandoned;  for  danger  from  the  faults  of  intimately 
associated  fellow  servants  is  one  of  the  occupational  risks, 
all  of  which,  as  a  general  rule,  a  workman  either  should  or 
should  not  be  deemed  to  assume.  And  so  far  as  the  fellow 
servant  rule  is  supported  by  reasons  of  public  policy,  it  has 
no  true  application  to  the  organized  industries,  wherein  the 
individual  workman  cannot,  by  any  degree  of  care,  protect 
himself  from   the   faults   of   his   fellows. 

But   here   again    the    proper   correction   is    not    simply   to 


COMPULSORY  INSURANCE  75 

abolish  the  defences  of  ''assumption  of  risks"  and  of  "fellow 
servant''  so  as  to  leave  the  employer  liable  fur  full  damages, 
for  that  w^ould  merely  shift  the  injustice  and  make  the  em- 
ployer liable  for  a  wrong,  where  he  has  been  guilty  of  no 
wrong.  The  compensation  law  solves  this  problem  of  justice 
by  treating  all  the  necessary  risks  of  employment  as  joint 
risks,  of  which  the  consequences  should  be  shared  between 
the  employer  and  his  injured  workmen;  and  it  accordingly 
imposes  upon  the  employer  a  legal  liability,  similar  to  that  of 
an  insurer,  to  pay  to  his  injured  workmen,  or  their  depend- 
ents, his  share  (generally  one-half)  of  their  wage  losses 
resulting  from  such  risks.  This  conception  of  a  joint  occu- 
pational risk,  of  a  mutual  responsibility  for  accidents  from 
occupational  risks,  of  a  moral  partnership  in  the  resulting 
losses,  is  the  great  basis  of  the  compensation  liability.  As 
a  conception  of  justice  it  is  primary  and  must  either  be  ac- 
cepted as  an  axiom  or  be  rejected.  But  the  idea  of  its 
justice  is  fortified  by  the  fact  that  as  a  rule  of  public  policy 
it  has  practical  merits  and  advantages  above  all  others.  It, 
therefore,  appears  to  be  the  best  rule  for  the  social  welfare 
and,  at  the  same  time  conforms  to  a  widely  accepted  idea 
of  justice. 

The  next  point  of  difference  between  the  two  systems  of 
law  is  the  criterion  which  determines  when,  on  the  one  side, 
the  employer  shall  be  subjected  to  liability  for  full  damages, 
and  when,  on  the  other  side,  the  injured  workman  shall  be 
deprived  of  the  right  of  anj'  redress.  Under  our  master  and 
servant  law  that  criterion  is  "negligence  as  a  proximate 
cause" — a  criterion  which  in  practical  application  is  so  in- 
definite and  uncertain  in  meaning  as  to  be  most  unsuitable 
for  that  purpose,  as  is  evidenced  by  the  thousands  of  litigated 
cases  to  which  its  definition  has  given  rise.  It  has  the 
further  demerit  of  being  scientifically  superficial.  Under  the 
compensation  law  that  criterion  is  "moral  fault,"  variously 
defined,  but  always  so  defined  and  limited  as  to  include  only 
such  a  degree  of  certain  moral  fault  as  justifies,  beyond 
doubt  or  reasonable  difference  of  opinion,  the  infliction  of  a 
penalty  upon  the  defaulting  party.     From  the  application  of 


76  SELECTED  ARTICLES 

this  latter  criterion  it  results  that  that  large  proportion  of 
accidents,  which  are  due  proximately  to  lack  of  ability,  mis- 
judgment,  lack  of  skill,  ignorance,  physical  or  mental  lassi- 
tude, mere  inadvertence  or  that  kind  or  degree  of  negligence 
whicli,  humanly  speaking,  is  at  times  inevitable  even  with 
careful  men,  and  which,  under  our  negligence  law,  result  in  a 
mass  of  litigation  and  entirely  fortuitous  determinations,  are, 
under  a  compensation  law,  not  attributed  to  fault  but  rather 
to  the  necessary  risks  of  employment;  and,  consequently,  for 
injuries  resulting  therefrom  the  emploj^er  is  made  liable  to 
pay  his  share  of  the  injured  workmen's  wage  losses  in  the 
form     of    compensation. 

The  next  difference  between  the  laws  of  "negligence"  and 
of  "compensation"  is  that  under  the  compensation  law  there 
is  a  presumption  of  fact  that  every  accident  results  from  a 
necessarj'  risk  of  the  employment  or  from  some  cause  or 
causes  for  which  employer  and  injured  employee  are  jointly 
responsible,  and  is,  therefore,  a  subject  of  compensation,  un- 
less fault  is  proved;  and  the  burden  of  proving  fault  is  upon 
the  party  asserting  it.  Is  that  presumption  just?  My  answer 
to'  that  question  is  that  an  intensive  study  of  the  causes  of 
accidents  in  New  York  factories  and  a  critical  analysis  of  the 
European  accident  statistics  convinces  me  beyond  all  doubt 
that,  at  least  under  conditions  which  prevail  in  the  organized 
and  hazardous  industries,  that  presumption  is  true,  and  there- 
fore just. 

The  final  difference  between  the  two  laws  is  that  under 
the  compensation  law  the  amount  of  compensation  is  meas- 
ured by  the  law  instead  of  by  the  almost  ultimate  discretion 
of  the  jury,  and  is  made  dependent  upon  certain  definite 
facts,  which  are  generally  easily  and  certainly  provable. 
Whether  this  method  of  fixing  the  amount  of  the  liability 
is  just  or  not  should  be  determined  by  its  results.  The 
object  of  the  law  is  to  do  justice.  It  should,  therefore,  be 
framed  to  effect  average  concrete  justice,  rather  than  to 
declare  abstract  rules  of  exact  justice  which  cannot  be  car- 
ried out  in  practice;  and  this  rule  of  the  compensation  law 
has    these    qualities    of  concrete    justice,    which    are    entirely 


COMPULSORY  IXSURANXE  tj 

lacking  in  the  negligence  law,  that  it  is  generally  prompt, 
certain  and  uniform  in  its  operation. 

Finally,  the  compensation  law  possesses  that  highest  at- 
tribute of  a  just  law,  that  it  satisfies  the  natural  sense  of 
justice  of  the  parties  affected  by  its  application;  for  it  is  the 
general  testimony  of  both  employers  and  employees  in  the 
majority  of  the  compensation  law  countries  that  tlic  law 
in   the  main  is  just  and  satisfactory. 

In  contrast  with  the  compensation  law,  our  negligence  law 
gives  universal  dissatisfaction.  Not  only  is  it  in  many  re- 
spects absolutely  unjust,  but  even  so  far  as  its  theories  are 
just  it  fails  to  carry  out  those  theories  in  practice,  but  results 
instead  in  a  medley  of  cruel  wrong,  oppressive  waste  and 
delayed  or  compromised  justice.  Moveover,  its  theories 
are  such  that  they  cannot  be  carried  out  in  practice,  because 
that  would  reciuire  an  impossibility,  namely:  that  accidents 
be  correctly  traced  to  their  respective  causes  and  the  respon- 
sibility for  those  causes  correctly  weighed  and  determined 
by  judges  and  juries.  Abroad,  even  experts,  making  many 
of  their  investigations  on  the  spot  and  unhampered  by  the 
motives  for  concealment  which  prevail  here,  cannot  with  any 
certainty  determine  the  true  causes  of  and  responsibility  for 
a  large  proportion  of  the  accidents  which  they  investigate, 
and,  as  to  the  mass  of  industrial  accidents,  can  only  arrive  at 
rough  opinion  estimates  of  average  causes  and  responsibili- 
ties. It  is  obvious  that  judges  and  juries,  especially  under 
our  methods  of  procedure,  are  infinitely  less  able  to  arrive 
at  that  exact  determination  of  the  causes  of  and  responsi- 
bility for  each  accident  which  a  correct  application  of  our 
law  requires.  Therefore  our  law,  even  in  so  far  as  it  is  good 
in  theory,  is  absurdly  bad  in  practice. 

The  fault  lies  not  so  much  with  the  machinery  of  our 
courts  as  with  the  law  itself.  For  the  law  starts  from  an  un- 
fair basis,  by  imposing  the  burden  of  proof  entirely  upon 
the  injured  workmen,  and  thereby  insures  injustice  to  them 
where,  as  happens,  in  a  large  proportion  of  cases,  from  the 
very  nature  of  the  accidents,  there  can  be  no  real  proof. 
And,  where   there   is   a   scintilla   of  proof,   our  law  is   wrong. 


78  SELECTED  ARTICLES 

not  so  much  in  making  jurors  judges  of  the  facts,  as  in  mak- 
ing them  judges  of  a  broad  field  of  inferences  from  distorted 
versions  of  a  part  of  the  facts,  without  scientific  rule  or 
reason  to  guide  them.  The  result  not  only  is,  but  must  be  a 
pure  gamble,  more  expensive,  wasteful,  distressing  and  cor- 
rupting than  any  form  of  gambling  prohibited  by  the  penal 
law. 

In  my  opinion  it  is  altogether  a  mistake  to  seek  to  rem- 
edy the  existing  evils  along  the  lines  of  our  "employers'  lia- 
bility" statutes.  Those  laws  are  in  too  many  respects  grossly 
unjust  to  employers,  increase  litigation,  are  expensive  and 
wasteful,  are  slow  and  uncertain  in  results,  and  furnish  small 
additional  relief  to  the  victims  of  industrial  accidents  in  the 
niass.  And  they  have  a  disastrous  effect  upon  the  public 
welfare,  for  they  foster  class  antagonism  between  employers 
and  employees,  and  they  interfere  with  proper  methods  for 
the  prevention  of  accidents  by  establishing  through  the  de- 
cisions of  our  courts  harmful  rules  and  precedents  on  ques- 
tions affecting  safety. 

An  illustration  of  this  last  proposition  may  be  enlighten- 
ing. We  have  in  our  New  York  Labor  Law  a  provision  that 
certain  machinery  shall  be  "properly  guarded."  The  factory 
inspectors,  in  their  enforcement  of  that  law,  construe  that 
provision  to  mean  that  such  machinery  must  be  so  arranged, 
placed,  boxed,  railed  off,  or  provided  with  safety  appliances 
as  to  be  made  as  safe  as  practicable.  But  our  courts  con- 
strue it  more  literally  to  mean  that  such  machinery  must 
have  applied  to  or  about  it  something  extra  as  and  for  a 
guard,  without  particular  regard  to  whether  or  not  that  will 
make  the  machinery  more  safe  or  more  dangerous.  Of 
course,  the  courts  have  not  categorically  said  that,  but  that 
is  the  effect  of  what  they  have  decided.  There  are  many 
cases  in  New  York  where  juries  have  awarded  and  our  higher 
courts  have  sustained  verdicts  for  punitive  damages  against 
employers  for  not  guarding  their  machinery  in  a  way  which, 
according  to  the  overwhelming  preponderance  of  expert 
opinion,  would  make  it  more  dangerous.  Such  decisions  are 
the  opposite  of  or  conducive  to  the  general  adoption  of  cor- 


COMPULSORY  INSURANCE  79 

rect  methods  for  the  prevention  of  accidents.  And  this 
is  but  one  of  many  points  about  which  the  reasonings  and 
decisions  of  our  courts  on  questions  affecting  safety  are  as 
foreign  to  scientific  truth  as  are  the  ideas  of  an  Indian 
medicine  man  about  the  causes  and  prevention  of  disease. 
It  is  a  principal  merit  of  the  compensation  law  that  under 
it  questions  of  industrial  safety  would  cease  almost  alto- 
gether to  be  a  subject  for  judicial  determination,  and  that 
the  intelligence  and  efforts  of  employers  would  then  be  di- 
rected towards  the  prevention  of  accidents  instead  of  towards 
the  maintenance  of  arbitrary  conditions  and  practices  which 
will  merely  prevent  liability  for  accidents. 

While  it  is  not  demonstrable  that  the  compensation  laws 
have  effected  any  reduction  in  the  proportion  of  accidents, 
because  there  is  not  the  requisite  data  for  purposes  of  com- 
parison; yet  it  is  certain  that  the  imposition  of  the  com- 
pensation liability  in  lieu  of  all  others  (save  in  exceptional 
cases),  would  remove  many  difficulties  in  the  way  of  studying 
the  causes  of  accidents  and  the  methods  of  their  prevention, 
and  would  aid  in  the  enforcement  of  safety  regulations  and 
be  conducive  to  their  voluntary  adoption.  And  it  is  equally 
certain  that  our  law  has  just  the  opposite  effect,  because  it 
gives  rise  to  an  impellent  motive  for  both  the  employer  and 
the  workman  who  is  injured  in  an  accident  to  suppress  or 
falsify  all  the  facts  relative  to  that  accident  which  might  ad- 
versely affect  their  respective  legal  rights  or  liabilities.  Con- 
sequentl3%  in  our  country,  this  subject  is  to  a  degree  hidden 
from  expert  investigation  by  a  fog  of  suppression,  misrepre- 
sentation and  positive  falsehood. 

In  conclusion  I  wish  to  emphasize  three  propositions, 
namely:  that  in  the  highly  organized  and  hazardous  in- 
dustries the  real  causes  of  accidents  are  generally  so  complex 
and  in  addition  often  so  remote,  that  as  to  a  material  propor- 
tion of  the  accidents  it  is  impossible,  by  any  methods  or 
means,  correctly  to  ascertain  the  facts  necessary  to  form  a 
correct  judgment  of  their  particular  causes;  that  as  to  a  yet 
larger  proportion  it  is  practically  impossible  to  do  so  with- 
out such  expense  and  delay  as  will  defeat  justice;  and   tliat 


go  SELECTED  ARTICLES 

as  to  those  accidents,  as  to  which  the  necessary  facts  are 
practicably  ascertainable,  there  is  no  simple  abstract  term, 
such  as  "negligence,"'  "carelessness,"  "fault,"  "gross  negli- 
gence,'' etc.,  which,  if  used  as  a  criterion  of  legal  liability, 
will  not  result  in  frequent  and  gross  injustice  and  inequality, 
whether  administered  and  applied  by  courts  and  juries  or  by 
more  competent  experts.  At  first  impression  the  exactness 
with  which  industrial  accidents  are -classified  in  the  German 
and  Austrian  statistical  tables,  under  the  headings  of  "due 
to  fault,"  "unavoidable,"  "due  to  lack  of  skill  and  careless- 
ness," etc.,  may  seem  to  contradict  these  propositions.  But 
in  so  far  as  those  tables  produce  that  impression  they  are 
misleading;  for  as  to  a  major  proportion  of  the  accidents 
classified  therein,  the  facts  have  not  been  thoroughly  investi- 
gated, but  rough  statements  have  been  relied  on,  and  there 
is  therefore  in  them  a  wide  margin  of  probable  error,  due  to 
that  one  cause;  and  the  terms  used  in  those  tables  are  so  far 
from  being  definite  and  are  employed  in  each  table  with  a 
meaning  so  uncertain  in  application  and  so  peculiarly  per- 
sonal to  its  compilers  that  a  re-classification  of  the  acci- 
dents covered  by  that  table,  under  the  same  terms,  by  a  dif- 
ferent set  of  experts,  would  inevitably  produce  widely  dififer- 
cnt  results.  The  conclusion  to  be  drawn  from  these  premises 
is,  that  the  idea  of  ascertaining  the  facts  as  to  each  particu- 
lar industrial  accident  and  then  determining  liability  accord- 
ing to  the  application  to  those  facts  of  some  simple  abstract 
rule  cannot  be  carried  out  in  practice;  but  that,  in  order 
to  obtain  a  rule  of  law  Which  will  be  at  all  fair  and  uniform 
in  practice,  it  is  absolutely  necessarj-  to  resort  to  the 
doctrine  of  averages.  That  is  what  the  compensation  law 
does  by  presuming  in  effect,  save  in  exceptional  cases  where 
the  contrary  is  proved,  that  everj'  accident  is  due  to  a  neces- 
sarj' risk  of  employment  or  to  some  other  cause  or  causes 
for  which  employer  and  injured  employee  are  jointly  re- 
sponsible; and  it  divides   the  damages  accordinglj-. 

In  arguing  for  the  justice  of  a  compensation  liability  in 
the  organized  hazardous  employments,  I  am  not  arguing 
against  its  justice   in  the  unorganized  or  safer  employments. 


COMPULSORY  INSURANCE     .  8i 

because  I  believe  tiiat,  with  some  important  exceptions  and 
subject  to  certain  conditions,  it  would  also,  in  practice,  be 
more  just  therein  than  the  existing  liabilit}'  for  negligence. 
And  I  am  not  arguing  that  reasons  of  justice  alone  should 
determine  the  form  which  a  compensation  law  should  take; 
for  I  believe  that  reasons  of  social  welfare  and  many  other 
reasons  should  in  many  respects  determine  both  the  form 
and  the  extension  of  such  a  law.  But  I  insist  that  such  a 
law  as  that  of  master  and  servant  should  be  based  upon 
conceptions  of  private  justice;  and  that  the  coinpensation 
laws  are  so  based,  and  are  not  unprincipled  measures  of  mere 
political  expediency. 

Annals  of  the  American  Academy.  38:  159-65.  July,  191 1. 

Argument  Against  Liability.     Walter  S.   Nichols. 

To  me  there  is  a  graver  issue  involved  in  the  enactment 
of  liability  laws  in  this  country  than  the  mere  compensation 
of  an  injured  employee.  Our  recent  conceptions  of  an  em- 
ployers' liability  are  of  foreign  birth,  the  outgrowth  of  so- 
cialistic theories,  which  for  years  have  been  gradually  per- 
meating the  states  of  Europe.  There  are  two  phases  of 
this  question  which  do  not  seem  to  be  receiving  the  consid- 
eration which  they  deserve.  I  hold  that  under  the  spirit, 
if  not  the  letter  of  our  constitution,  no  ordinary  employer  of 
labor  can  justly  be  made  liable  for  an  injury  for  which 
he  was  not  actually  or  constructively  at  fault,  and  that  every 
attempt  to  impose  such  a  liability  is  an  attack  on  the  man- 
hood of  employees  as  American  citizens.  Subject  to  the 
legitimate  police  power  of  the  state,  every  American  free- 
man has  the  constitutional  right  to  contract  for  his  services. 
Under  all  ordinary  circumstances,  this  contract  assumes  fhat 
he  is  capable  and  willing  to  perform  the  work  which  he 
undertakes.  Such  service  in  free  America,  at  least,  is  not 
different  in  its  fundamental  character  from  other  business 
contracts;  it  is  simply  an  exchange  of  personal  labor  for 
money    compensation.       Both    parties    are    independent    con- 


82  SELECTED  ARTICLES 

tractors.  There  is  no  more  reason  in  the  nature  of  things 
why  a  freeman  who  contracts  for  his  manual  labor  should 
impose  on  the  party  with  whom  he  contracts  responsibility 
for  injuries  which  are  due  to  no  fault  of  the  latter  than  why 
a  like  responsibility  should  not  attach  to  other  forms  of  con- 
tract. As  well  might  the  architect  or  the  builder  who  con- 
tracts for  the  erection  of  a  dwelling  allege  the  same  re- 
sponsibility. The  fact  that  the  ordinary  servant  is  under  a 
stricter  and  more  detailed  control  goes  no  further  than  to 
enlarge  the  duty  of  the  employer  to  see  that  his  own  acts 
are   free   from   blame. 

The  only  ground  on  which  such  legal  responsibility  can 
be  claimed  is  the  exercise  of  the  police  power  of  the  state 
based  on  public  policy.  Is  there  any  public  policy  which 
.would  sustain  such  police  power  in  the  case  of  ordinary  em- 
ployments? Here,  a  false  theory  seems  to  have  been  uni- 
versally accepted.  It  is  assumed  that  employees  would 
escape  injury  except  for  the  special  work  in  which  they  may 
be  emploj'ed;  that  the  responsibility  for  the  injury  attaches 
to  the  particular  work  being  done.  On  the  contrary,  it  may 
well  be  questioned  whether  in  the  ordinary  occupations  of 
life  the  risk  of  accident  is  not  even  less  among  those  actively 
engaged  in  the  service  of  others  than  if  not  so  engaged.  The 
employee  is  not  a  mere  piece  of  mechanism,  carefully  housed 
and  sheltered  from  danger  except  when  actively  in  service. 
He  is  a  man  and  a  member  of  society,  with  all  the  obliga- 
tions imposed  on  him  by  such  meinbership.  First  and  fore- 
most of  these  obligations  is  that  he  shall  do  his  legitimate 
share  of  the  world's  work.  To  earn  his  bread  by  the  sweat 
of  his  brow  is  the  law  of  nature  imposed  on  man  in  his  very 
evolution  from  a  lower  vertebrate.  It  is  a  law  whose  princi- 
ple lies  at  the  very  foundation  of  all  life,  even  that  of  the 
lowest  monera  or  of  the  vegetable  cell.  Conscious  or  un- 
conscious activity  is  the  very  essence  of  life.  The  evolution 
of  society  has  simply  inoulded  the  lines  along  which  this 
activity  must  be  directed.  It  has  simply  organized  the  mem- 
bers into  a  social  system  under  which  their  labor  is  differen- 
tiated and  its  fruits  exchanged  instead  of,  as  among  their  sav- 


COMPULSORY  INSURANCE  83 

age  ancestors,  every  man  working  for  himself.  We  have 
simply  exchanged  slaverj'  to  untamed  nature  for  a  lesser 
servitude  to  society  at  large.  Whether  employed  in  the  serv- 
ice of  another  or  not,  every  man  is  exposed  to  the  risk 
of  accidental  injury.  There  is  nothing  in  all  this  which  sug- 
gests a  natural  claim  of  one  member  against  another  for 
injuries  due  to  his  own  fault  or  misfortune.  On  the  contrary, 
the  whole  development  of  societj^  has  been  along  the  line  of 
protection  to  the  worker.  It  is  as  true  to-day  as  it  was  a 
thousand  years  ago  that  in  the  ordinary  occupations  of  life 
the  worker  is  in  reality  in  a  measure  safeguarded  through 
his  very  employment.  Not  until  now  has  the  truth  of  this 
great  principle  been  seriously  questioned.  From  the  buried 
cities  of  Mesopotamia  are  unearthed  the  records  of  contracts 
made  six  thousand  years  ago,  and  in  the  laws  of  the  Roman 
Empire,  we  maj^  read  the  story  of  their  transmission  in  spirit 
to  the  nations  of  modern  Europe  and  to  America.  But  no- 
where heretofore,  so  far  as  I  know,  has  the  right  and 
ability  of  a  freeman  to  assume  the  risk  of  his  employment 
been  questioned. 

What  are  the  grounds  of  that  public  policy  which  it  is 
claimed  has  changed  the  nature  of  this  contract  relation  that 
has  existed  from  time  immemorial?  W"e  are  told  they  are  to 
be  found  in  the  complex  conditions  of  modern  industrial  life,. 
under  which  the  employee  is  subject  to  risks  more  hazardous 
than  ever  before,  and  to  that  greater  economic  differentiation 
which  has  widened  the  gulf  between  the  workman  and  his 
•employer,  which  has  weakened  the  personal  relations  once 
existing  between  the  two,  and  has  reduced  the  former  to 
little  more  than  a  machine  to  be  exploited  under  a  new 
system  of  employment,  representing  not  men  but  soulless 
corporations;  that  giant  monopolies  of  capital  have  practi- 
cally reduced  the  workmen  to  a  condition  of  indusfial  servi- 
tude. For  these  reasons,  it  is  urged  that  public  policy  calls 
for  the  intervention  of  the  police  power  of  the  state  to 
compel  either  the  individual  employer  or  the  state  itself  to 
assume  that  responsibility  for  injuries  to  the  workers  which 
they    themselves    formerly    bore. 


84  SFXECTED  ARTICLES 

Whatever  may  be  said'  for  this  argument  under  the 
monarchical  systems  of  the  old  world,  it  fails  in  its  applica- 
tion here,  unless  our  whole  theory  of  government  is  to  be 
abandoned  for  another  on  essentially  socialistic  lines.  The 
broadest  liberty  of  the  individual  consistent  with  his  obliga- 
tions to  society  was  a  corner-stone,  on  which  our  whole 
national  fabric  was  reared,  and  closely  allied  to  it  was  an- 
other, protection  of  individual  property  rights  against  aggres- 
sion even  by  the  state.  When  Webster  won  that  immortal 
decision  concerning  the  sacred  rights  of  property  and  of 
contract  in  the  Dartmouth  College  case,  which  has  ever  since 
been  the  law  of  the  land,  he  welded  a  construction  into  state 
and  federal  constitutions  only  less  important  than  that  in- 
volved in  the  conclusion  of  his  famous  debate  with  Hayne, 
a  construction  which  has  cost  the  best  blood  of  the  land  to 
maintain  "the  Union  now  and  forever,  one  and  inseparable." 
Under  our  constitution,  as  it  now  stands,  no  plea  of  police 
power  can  well  divest  an  employer  of  his  property  on  the 
ground  that  he  is  liable  for  an  injury  where  he  was  without 
fault.  The  application  of  this  principle  has  been  sought  to  be 
avoided  by  using  the  police  power  of  the  state  to  abridge  the 
right  of  contract  and  compel  the  employer  to  incorporate 
the  tacit  assumption  of  a  liability  for  injuries  in  his  agree- 
ments with  his  workmen.  How  far  the  police  power  of  a 
state  may  thus  abridge  the  right  of  contract  yet  remains  to 
be  seen.  In  right  reason,  it  would  seem  that  no  such  power 
should  exist  in  ordinary  contracts  of  employment  in  which, 
as  already  explained,  the  hazards  of  occupation  are  not  es- 
sentially different  from  those  of  ordinary  life.  The  work- 
man here  is  asked  to  assume  no  increase  of  risk  which  can 
fairly  be  charged  against  the  property  of  his  employer,  or 
be  made  a  basis  for  public  compensation,  unless  socialism 
is  to  be  substituted  for  individualism  in  the  spirit  of  our  con- 
stitution. To  employ  and  to  be  employed  is  a  fundamental 
right  of  ever}'  citizen  of  the  Republic,  the  very  essence  of 
our  economic  existence,  even  more — of  our  very  civilization. 
No  police  power  can  properly  abridge  it  more  than  the  pub- 
lic   welfare    absolutely    demands.      It    may    well    be    doubted 


COMPULSORY  INSURANCE  85 

whether  any  plea  of  public  policy  can  impose  on  every  man 
who  ventures  to  contract  for  the  service  of  another  an  un- 
known liability  for  injuries  due  to  the  fault  or  misfortune 
of  the  latter  with  all  its  attendant  train  of  fraud  and  black- 
mail, and  it  may  be  at  the  risk  of  his  own  financial  ruin.  No 
policy  would  seem  more  destructive  to  the  actual  welfare 
of  the  state.  While  in  the  case  of  certain  corporate  carriers, 
creatures  of  the  stale  and  impressed  with  duties  to  the  pub- 
lic, such  police  power  has  been  at  times  sustained,  the  Court 
of  Appeals  of  New  York  in  its  recent  decision  has,  by  a 
unanimous  vote,  emphasized  the  principle  that  no  public 
policy  can  be  invoked  to  sustain  a  law  which  thus  divests  an 
employer  of  his  property  without  his  own  fault,  even  though 
his  liability  may  be  limited  to  exceptionally  dangerous  risks. 
Our  neighboring  state  of  New  Jersey  in  attempting  to  evade 
this  decision  by  depriving  the  employer  of  his  present  pro- 
tection by'  the  court  in  case  of  his  refusal  to  accept  an  un- 
constitutional law,  strongly  suggests  an  attempt  to  whip  the 
devil  round  the  stump.  The  defenses  which  it  would  deny 
him  are  grounded  not  on  mere  expediency,  but  are  rooted 
in  those  principles  of  natural  justice  which  underlie  our 
economic  S3'stem  and  have  been  well  established  in  all  our 
jurisprudence. 

As  a  dictum  unnecessary  for  the  decision  of  the  case, 
the  New  York  Court  of  Appeals  has  declared  that  both  the 
fellow  servant  and  the  contributory  negligence  clause  as  de- 
fenses are  within  the  scope  of  legislative  control.  But  it  as 
strongly  affirms  that  neither  can  be  so  modified  as  to  impute 
to  the  employer  a  fault  due  to  the  employee.  Both  these 
clauses  relate  to  the  legal  cause  of  the  accident.  The  ques- 
tion of  responsibility  depends  on  this  legal  cause.  Whether 
a  fellow  servant  or  an  assumed  negligence  of  the  employee 
is  in  the  legal  sense  the  efficient  cause  or  a  mere  link  in  the 
chain  of  casualty,  which  no  court  will  consider,  must  still  re- 
main, it  would  seem,  a  valid  question  of  law  regardless  of 
such  enactments  as  that  of  New  Jersey.  The  act  or  neglect 
of  the  employer  must  still  be  the  efficient  cause  of  the  in- 
jury in  order  to  constitutionally  impose  on  him  the   liability. 


86  SELECTED  ARTICLES 

But  gravest,  perhaps,  of  all  objections  is  the  effect  of  such 
legislation  both  on  the  working  men  themselves  and  on  the 
commonwealth  at  large.  By  such  laws  those  who  contract 
for  their  personal  services  are  placed  in  a  class  by  them- 
selves politically  subordinate  to  the  rest  of  their  fellows. 
They  are  no  longer  to  be  dealt  with  as  freeborn  citizens 
competent  like  others  to  care  for  their  own  affairs,  and  cap- 
able like  others  of  engaging  in  all  the  activities  of  busi- 
ness life  unfettered  by  political  restraints.  To  them  the  words 
of  the  great  declaration  promulgated  in  this  city  a  hundred 
and  thirty-five  years  ago  that  all  men  are  born  free  and 
equal  and  entitled  to  life,  liberty  and  the  pursuit  of  happiness 
must  have  a  changed  meaning.  They  are  to  be  dealt  with 
as  incompetent  wards  of  the  state  who  must  be  protected 
against  themselves,  incapable  of  freely  contracting  for  their 
services  and  subject  like  the  medieval  serfs  to  assumed  task- 
masters, who  must  answer  for  their  safety  and  be  responsible 
for  their  mishaps.  Is  that  to  be  the  future  spirit  of  our 
constitution  and  of  our  economic  system?  Is  it  the  spirit  of 
Americanism  under  which  our  country  has  achieved  its 
greatness?  The  employee  of  yesterday  will  be  the  employer 
of  to-morrow.  Our  future  captains  of  industry  will  be  re- 
cruited not  from  the  ranks  of  wealth,  but  from  the  descend- 
ants of  the  horny-handed  sons  of  toil.  Politically,  America 
knows  no  servile  class.  Is  all  this, to  be  changed  and  a  spirit 
of  state  socialism  to  be  inculcated  in  our  rising  generation 
through  the  operation  of  laws  which  make  the  employer  the 
keeper  of  those  whom  he  employs?  To-day  one  of  the  grav- 
est financial  problems  which  confronts  our  local  systems 
of  rapid  transit  is  the  damage  suit  for  real  or  alleged  in- 
juries to  those  in  transit.  Fraud  and  blackmail  play  a  leading 
part.  In  New  York,  the  passage  of  the  recent  Employers' 
Liability  Law  was  the  signal  for  a  heavy  increase  in  the 
claim  ratios  of  the  insurers.  From  England,  and  even  Ger- 
many, come  the  same  story  of  the  weakening  of  the  moral 
fibre  of  the  classes  whom  such  laws  aim  to  protect. 

We  are  treading  on  dangerous  ground  in  seeking  to  fol- 
low  the   footsteps    of   Europe    regarding   emploj^ers'   liability. 


COMPULSOR^■  IXSUR.WXE  87 

Wc  are  in  danger  of  sacrificing  the  nation's  birthright;  the 
independent  manhood  and  political  equality  of  the  individ- 
ual citizen  won  b}-  the  founders  of  the  Republic  through 
the  sufferings  at  Alorristown  and  Valley  Forge.  Can  the 
American  people  afford  to  surrender  it  for  any  gains  that 
may  come  through  the  better  protection  of  the  working 
classes  against  the  risks  attendant  on  our  complex  industrial 
conditions?  Is  it  not  better  that  another  solution  of  this 
grave  industrial  problem  be  sought?  To  me  the  true  solu- 
tion lies  along  the  line  of  insurance,  not  compulsory  but 
voluntary,  on  the  part  of  the  workman  himself  as  an  intelli- 
gent self-respecting  citizen  to  whom  has  been  committed 
his  full  share  in  the  government  of  his  country.  Aided  and 
encouraged  he  may  well  be  by  any  legislation  which  will 
not  sacrifice  his  manhood  or  violate  the  constitutional  rights 
of  his  fellow  members  of  society.  It  is  right  that  he  should 
be  protected  and  he  should  be  educated  to  it  as  to  every 
other  civic  duty.  It  is  right  that  the  cost  of  his  protection 
should  be  an  element  of  his  compensation  for  his  labor.  But 
I  believe  that  in  doing  so  no  jot  or  tittle  of  the  spirit  of  the 
American  Constitution  should  be  surrendered.  Not  long  ago, 
the  business  activity  of  all  France  was  suddenlj-  checked  by 
a  gigantic  strike  of  employees  to  ameliorate  their  social  con- 
ditions. The  hand  of  the  government  itself  was  threatened 
with  paralysis.  It  was  successfullj'  met  and  its  backbone 
was  broken  by  a  call  to  the  colors.  The  strikers  were  called 
on  to  choose  between  their  obligations  to  their  country  and 
the  betterments  for  themselves  which  thej^  sought  by  over- 
turning its  social  order.  The  spirit  of  patriotism  prevailed 
and  they  rallied  round  the  flag.  The  same  fundamental  is- 
sue underlies  this  question  of  liability  legislation.  Shall 
it  be  dealt  with  in  a  spirit  which  recognizes  the  paramount 
claims  of  the  constitutional  principles  on  which  our  govern- 
ment was  established,  those  of  political  equality  and  in- 
dividualism, or  shall  these  be  sacrificed  for  socialistic  princi- 
ples which  will  divide  society  into  two  classes:  one  of 
industrial  serfs,  wards  of  the  state  incapable  of  self-protec- 
tion,  the   other  of  overlords   commissioned   to   be   their  legal 


88  SELECTED  ARTICLES 

guardians?  It  is  natural  to  move  along  the  line  of  least 
resistance  and  to  seek  the  remedies  which  offer  the  speediest 
relief  regardless  of  the  future.  But  I  take  it  that  the  man- 
hood of  the  future  American  citizen  and  the  political  equal- 
ity which  is  his  birthright  may  be  worth  even  more  than 
the  material  advantages  of  socialistic  laws.  When  the  proud 
Roman  matron  declared  of  her  sons,  liacc  vica  ornamenta 
(these  are  my  jewels),  she  uttered  a  truth  which  equally 
applies  to  every  commonwealth.  The  real  strength  of  a 
nation  lies  in  its  citizens,  not  in  its  material  possessions.  The 
downfall  of  the  mightiest  empire  of  antiquity  was  heralded 
by  its  accumulating  wealth  attended  by  the  breaking  down 
of  the  moral  fibre  of  its  people.  I  would  have  every  worker 
standing  side  by  side  with  his  employer  as  a  political  sov- 
ereign trained  to  insure  his  own  protection  and  aided,  if 
need  be,  by  the  state  within  constitutional  lines  to  exact  the 
compensation   for   his    services    necessary    for   the   purpose. 


Annals  of  the  American  Academy.  38:  175-83.  July,  1911. 

Sj'stem   Best  Adapted  to  the  United   States. 

Miles  ^l.  Dawson. 

The  best  system  would  obviously  be  best  adapted  to  the 
best  nation.  Though  not  intending  to  indulge  in  boasting,  we 
would  be  very  loath  to  admit  that  the  United  States  was  not 
easily  first  among  nations.  If  there  are  reasons  why  the 
system  is  objected  to,  these  reasons  then  must  obviously  be 
based  upon  mere  prejudice.  Such  ought  not  to  stand  in 
the  way  of  its  adoption  when  the  facts  are  fulh-  known; 
and  will  not  stand  in  the  way  if  our  nation  really  is  the  best 
and   its  people  worthy  of  it. 

Workmen's  compensation  is  at  present  being  presented 
to  the  American  people  in  three  forms,  viz.: 

First:  In  a  form  merely  optional,  i.  e.,  contemplating  that 
employers  and  employees  should  bring  themselves  under  its 
provisions  (which,  except  in  the  Ohio  bill,  provides  for  direct 


COMPULSORY  INSURANCE  89 

liability  of  the  employer,  instead  of  insurance)  by  their  own 
action,  or  quasi-optional,  i.  e.,  requiring  them,  if  not  desiring 
to  be  bound  by  its  provisions,  to  take  aftirmative  action  in- 
dicating their   election. 

A  law  of  the  former  character  was  enacted  in  New  York 
last  year,  and  took  effect  on  September  1st  last.  It  is  reported 
that  but  one  employer  has  brought  himself  and  his  em- 
ployees within  its  purview.  This,  notwithstanding  the  fact 
that  the  defenses  against  employers'  liability  have  been  con- 
siderably inodified,  a  fact  which  is  elsewhere  expected  to 
cause  all  employers  to  seek  refuge  under  the  provisions  of 
such  an  act. 

Possibly  a  law  like  that  which  is  proposed  in  Ohio,  re- 
moving the  defences  against  an  action  for  negligence,  but 
offering  a  safe  haven  in  state  insurance  of  the  compensa- 
tion type,  might  bring  more  employers  under  the  compen- 
sation provisions. 

Undoubtedly,  under  a  quasi-optional  system,  requiring 
written  notice  to  certain  officials  to  avoid  coming  under  its 
provisions,  a  very  large  proportion  would  find  themselves  in- 
cluded within  them;  but  the  same  reasoning  which  caused  the 
Court  of  Appeals  of  the  State  of  New  York  to  hold  that  a  so- 
called  "compulsory  compensation  act"  is  unconstitutional,  as 
taking  private  property  without  due  process  of  law,  would 
perhaps  apply  to  any  such  form,  not  wholly  and  in  fact  op- 
tional. 

Moreover,  it  cannot  be  denied  that  either  an  optional  or 
a  quasi-optional  workmen's  compensation  system  is  but  a 
partial  and  incomplete  solution  of  the  serious  problems  at 
which  such  legislation  is   directed. 

Notwithstanding  all  this,  New  Jersey  has  just  had  re- 
course to  legislation  of  this  type,  and  such  legislation  is  in 
process  of  enactment  in  Ohio,  with  every  chance  of  success 
and  differing  from  the  other  only  in  that  state  insurance  is 
the  option  offered.  It  is  also  expected  that  the  Wisconsin 
legislation  will  take  the  same  form.^ 


'It  has,  as  have  also  the  new  laws  in  New  Hampshire  and  Cali- 
fornia. 


90  SELECTED  ARTICLES 

Second:  A  law  substituting  for  the  present  employers'  lia- 
bility law,  a  system  of  workmen's  compensation,  the  employ- 
er to  be  liable  for  the  payment  of  the  compensations  and  the 
same  to   be   applicable   to  all   employments. 

With  the  exception  that  it  was  not  made  applicable  to  all 
employments,  but  only  to  certain  of  them  which  were  se- 
lected by  reason  of  the  extraordinary  peril  attending  them, 
and  by  reason  of  their  not  being  in  competition  with  similar 
industries  of  other  states,  this  is  the  form  which  was  taken 
by  the  so-called  "compulsory"  workmen's  compensation  act 
of  New  York. 

It  is  now  a  matter  of  history  that  this  has  been  declared 
unconstitutional  by  the  unanimous  opinion  of  the  Court  of 
Appeals.  It  is  declared  unconstitutional  both  under  the  pro- 
visions of  the  state  constitution,  and  under  the  provisions  of 
the  federal  constitution.  Against  the  former  determination 
there  is  no  appeal;  and,  consequently,  so  far  as  New  York 
is  concerned,  the  question  is  finally  disposed  of,  unless  the 
constitution  be  amended." 

Should  such  a  system  be  upheld,  it  would  produce  as  good 
results  as  would  an  optional  system  such  as  the  New  York 
or  the  New  Jersey  type,  if  the  latter  were  to  be  universally 
accepted. 

But  this  system,  even  if  available,  is  certainly  not  the  best. 
In  the  first  place,  it  involves  many  uncertainties,  both  for 
the  employer  and  for  the  employees.  Thus,  had  there  been 
such  a  statute  in  force  and  applicable  to  the  manufacturing 
company  upon  whose  premises  the  frightful  holocaust  oc- 
curred in  New  York  on  the  very  day  the  decision  of  the 
Court  of  Appeals  was  announced,  it  would  have  resulted,  as 
doubtlessly  suits  for  negligence  under  the  existing  law  will 
result,  in  the  ruin  of  the  employer  while  little,  if  anything 
would  have  been  realized  for  the  families  of  the  deceased  or 
for  those  who  were  injured. 

This  illustrates  two  things,  viz.:  (a)  that  it  is  by  no  means 
certain  that,  under  the  system   of  holding  the  employer  di- 


*This  has   since  been   recommended   by  the   Commission  and  a 
bill  has  been  introduced  to  submit  an  amendment  to  the  voters. 


COMPULSORY  INSURANCE  9I 

rectly  liable,  the  burden  will  be  distributed,  and  thus  appear 
in  the  price  of  the  products  or  services  to  be  paid  conse- 
quently by  the  consumer;  and  (b)  that  it  is  by  no  means 
certain  that  the  compensation  will  be  paid  at  all.  In  neither 
case  is  the  community  well  served. 

In  the  next  place,  it  is  a  wasteful  system.  The  only 
means  by  which  a  proper  distribution  of  the  costs  can  be 
made  under  it  is  by  private,  voluntary  insurance.  In  Great 
Britain,  where  such  a  law  is  in  force  without  modification, 
and  where  the  best  stock  companies  in  Europe  that  insure 
against  such  risks,  are  to  be  found,  it  costs,  roughly,  a  shill- 
ing for  expenses  to  get  a  shilling  of  benefits  to  the  depend- 
ents of  the  deceased  workmen  and  to  those  who  are  injured. 
It  costs  no  less  than  30  per  cent  of  the  entire  sum  disbursed 
in  benefits  merely  to  pay  agents  for  soliciting  the  patronage 
of  employers;  and  this  does  not  include  the  costs  of  superin- 
tendence. 

If  an  adequate  sj^stem  of  this  type  were  introduced 
throughout  the  United  States,  giving  benefits  as  large  as,  for 
instance,  in  Germany,  I  estimate  that  it  would  cost,  net,  about 
$400,000,000  per  annum,  to  pay  the  compensation  after  the 
plan   was   in   full   swing. 

If  the  expense  were  100  per  cent,  as  in  Great  Britain,  this 

-would  mean  $400,000,000  added  to  the  net  cost.     Of  this  vast 

sum   at  least  $120,000,000  would  be  paid   for  the   services   of 

solicitors — an   army   of   agents,   yet   to   be   drawn    from    other 

occupations   and  put   into  this. 

These  figures  may  look  large;  but  it  was  estimated  several 
years  ago  from  the  official  returns,  that  the  commissions  to 
fire  insurance  agents  in  the  United  States  were  no  less  than 
$115,000,000;  and  it  is  safe  to  say  that  under  an  adequate 
system  of  workmen's  compensation,  covered  only  bj'  private 
insurance,  the  premiums  would  aggregate  a  greater  sum  than 
is  paid  for  fire  insurance.  The  amount  paid  in  commissions 
would  be  at  least  as  large,  and  the  amount  paid  in  total  ex- 
penses would   be   considerably  larger. 

Moreover,     there     is     virtually     an     irresistible     tendency. 


92  SELECTED  ARTICLES 

when  the  employer  is  held  directly  liable,  to  impair  the  efifec- 
tiveness  and  value  of  the  compensation   system  itself. 

Thus  all  such  bills  offered  in  the  United  States  so  far, 
have  provided  for  limiting  the  payment  of  benefits  to  cases 
of  total  disability,  or  to  widows  and  orphans,  for  a  certain 
number  of  years,  thus  leaving  all  those  who  live  beyond  that 
period  unprovided  for. 

In  no  other  country,  not  even  in  those  which  have  adopted 
legislation  of  this  type,  has  such  cowardice  been  exhibited. 
In  our  own,  it  has  not  been  exhibited  as  will  be  seen,  in  the 
state  insurance  law,  just  enacted  in  the  state  of  Washington. 
There  are  two  things  which  have  caused  this  action  to  be 
taken,  viz.:  The  objection  that  an  employer  does  not  wish  to 
be  placed  in  a  position  where  he  will  be  liable  to  furnish  a 
permanent  income,  to  the  injured  individual  or  his  dependents. 
It  is  put  thus:  "It  must  stop,  somewhere."  In  the  next  place, 
the  private  insurance  companies  have,  to  my  knowledge, 
urged  that  they  could  not  well  figure  what  it  would  .cost  on 
this  basis.  This  is  true  in  a  sense,  although  such  costs  may 
be  estimated  from  foreign  statistics,  within  a  reasonable 
range. 

Even  when,  as  in  Great  Britain,  there  is  a  provision  that 
at  least  the  benefits  for  permanent  disability  must  be  paid 
during  the  continuance  of  the  disability,  it  is  found  in  practice 
that  every  loophole  in  the  statute  which  will  permit  compro- 
mise is  promptly  availed  of.  This  is  well  illustrated  by  the 
very  small  reserve  which  British  companies  are  required  to 
hold  in  order  to  take  care  of  such  deferred  liabilities  and 
perhaps  even  better  by  this  criticism  which  recently  appeared 
in  a  prominent  British  insurance  paper,  operated  also  as  a 
journal  in  the  interest  of  the  companies: 

We  must  say,  that  if  anything  is  lil^ely  to  provoke  the  state  to 
start  compensation  insurance,  it  is  the  action  of  many  ofRces  in 
"bluffing"  claimants  into  unjust  settlements.  Almost  every  day  we 
notice  in  some  part  of  the  country  the  intervention  of  the  County 
Court  to  prevent  the  registration  of  some  agreement  which  is 
manifestly  unfair  *  *  *  To-day  they  often  trade  upon  the 
Ignorance  of  claimants  when  they  should  be  collecting  higher 
premium  rates.  This  naturally  arouses  the  anger  of  all  right 
minded  persons  and  it  certainly  gives  those  members  of  the  com- 
munity who  are  inclined  towards  socialism  an  opportunity  to  plead 
for  the  nationalization  of  all  the  means  of  production,   distribution 


COMPULSORY  INSURANCE  93 

and  exchange.  If  the  insurance  offices  serve  the  public  well  they 
have  nothing  to  fear,  but  shaving  claims  to  swell  dividend  returns 
is  not  good  service. 

This  editorial  was  based  tipon  the  following  statonicnt 
concerning  the   decision   of  a    British  judge: 

Judge  Emden  said  that  he  did  not  approve  at  all  of  those  lump 
sums.  They  were  getting  far  too  frequent.  He  believed  that  he 
was  correct  in  saying  that  now  the  larger  portion  of  the  woik  un- 
der the  Workingnien's  Compensation  Act  was  being  transacted  un- 
der agreements  of  that  character  and  the  object  of  the  act  was  be- 
ing defeated.  If  the  case  before  him  was,  as  was  alleged,  an  im- 
proper case  to  bring,  it  was  not  a  case  for  an  agreement  at  all, 
and  ought  to  be  dismissed.  If  it  was  a  proper  case,  then  an  agree- 
ment was  not  the  right  way  to  dispose  of  it,  and  he  did  not  think 
the  workman  would  be  properly  protected  unless  the  matter  came 
before  the  court.  He  had  been  watching  those  cases  for  some 
time,  and  his  conclusion,  based  upon  investigation,  was  that  the 
whole  beneficial  effect  of  the  act  was  being  defeated. 

Mr.  Hurd  said  if  the  payment  of  lump  sums  under  agreements 
were  abolished  there  ought  to  be  some  central  authority  to  say 
when  a  man  should  return  to  work. 

Jvidge  Emden — That  is  equivalent  to  saying  the  act  cannot  be 
worked  in  its  present  way  satisfactorily. 

His  Honor  declined  to  accede  to  the  application,  remarking  that 
agreements  of  that  kind  were  increasing  to  such  an  extent  that 
he  must  do  all  he  could  to  stop  him. 

When  the  payments  are  commuted  in  this  manner,  the 
ultimate  result  must  be  that  one  of  the  chief  purposes  of  such 
legislation,  viz.:  that  these  unfortunates  be  provided  an  in- 
come, will  be  defeated;  and  it  is  to  be  expected  in  conse- 
quence that  they  will  soon  be  dependent  on  public  or  private 
charity,  precisely  as  if  no  such  plan  had  been  introduced. 

As  much  is  indicated,  likewise,  by  the  reports  of  the  com- 
mittee sent  by  the  Trades  Congress  of  Great  Britain  to  study 
the  German  situation,  which  said,  among  other  things,  that  it 
was  observable  that  in  Germany  there  were  literally  no  slums 
— a  fact  sharply  in  contrast  with  the  conditions  in  Great 
Britain  under  its  exceptionally  liberal  compensation  act. 

Third:  A  system  of  compulsory  insurance  in  which  the 
state  lends  its  sovereign  power  to  afford  at  least  the  compul- 
sion and  in  which  it  either  maj^  or  may  not  also  assume  the 
management  and  conduct  of  the  business. 

Many  critics  have  regarded  this  as  peculiarly  un-Ameri- 
can; but  the  interesting  thing  about  it  is  that  it  was  regarded 
as  quite  as  peculiarly  un-German,  un-Norwegian,  un-Gallican, 
and,  so  late  as  three  years  ago,  tin-British,  and  on  precisely 


94  SELECTED  ARTICLES 

the  same  ground,  viz. :  that  "ours  is  a  free  people  and  will 
not  endure  compulsion." 

Yet  the  system  has  now  been  in  use  in  Germany  for 
twenty-five  years,  and  is  so  thoroughly  satisfactory,  both  to 
employers  and  employees,  that  nothing  would  induce  them 
to  change.  It  has  also  been  in  force  in  Austria  for  nearly 
as  long  a  period,  a  country  where  they  have  the  mixed 
population  problem  as  in  the  United  States,  and  in  a  more 
aggravated  form.  The  satisfaction  with  the  system  has  been 
such  that  the  joint  kingdom  of  Hungary  has,  after  waiting 
over  twenty  years  also  introduced  compulsory  insurance.  In 
Norway,  which  has  the  reputation  of  being,  next  to  Switzer- 
land, the  most  democratic  country  in  Europe,  it  has  been  so 
popular  likewise  that  compulsory  sickness  insurance,  recent- 
ly introduced,  is  now  also  generally  acceptable.  In  France, 
after  two  decades  of  resistance  and  over  ten  years'  experi- 
ence with  a  law  holding  the  employer  directly  responsible, 
compulsion  has  been  accepted  in  connection  with  an  invalid- 
ity and  pension  fund  plan.  And  in  Great  Britain,  there  is 
virtually  no  outcry  on  the  part  of  either  employers  or  em- 
ployees, against  the  proposals  of  the  present  government  to 
introduce  compulsory  insurance  against  invalidity  and  also 
against  unemployment. 

In  our  own  country,  even  before  the  present  agitation 
got  under  way,  the  employers  and  employees  who  were  en- 
gaged in  coal  mining  in  certain  counties  in  Maryland,  were 
so  much  in  earnest  about  the  matter  that  after  passing  one 
compulsory  insurance  act,  which  was  declared  unconstitu- 
tional, they  secured  another  to  obviate  the  constitutional 
difficulties;  and  the  legislature  of  Montana,  with  the  approval 
of  the  owners  of  coal  mines  there  as  well  as  of  the  miners, 
adopted  a  similar  plan  for  that  state. 

At  the  present  time,  plans  of  state  insurance,  either  com- 
pulsory or  optional  or  quasi-compulsory,  are  before  the  legis- 
latures of  several  states,  including  Michigan,  Ohio  and  Texas, 
and  already  a  compulsory  state  insurance  plan,  applying 
to  nearly  all  employments,  has  been  enacted  into  law  in  the 
jjtate  of  Washington. 


COMPULSORY  INSURANCE  Q5 

It  does  not  appear,  therefore,  that  when  the  subject  is 
fully  understood,  there  is  any  insuperable  prejudice  against 
state  insurance,  if  it  will  produce  the  best  result  for  the  least 
expenditure  of  money.  It  must  be  admitted  that  state  in- 
surance is  effectual.  It  really  does  accomplish  what  it  sets 
out  to  accomplish.  It  has  everywhere  been  conducted  eco- 
nomically, whether  the  management  be  kept  in  the  hands  of 
the  state  or  in  the  hands  of  the  employers  or  of  employers 
and  employees  together.  Thus,  the  expense  in  Norway, 
Austria  and  Germany  is  in  no  case  more  than  i6  per  cent  of 
the  net  costs,  as  compared  with  lOO  per  cent  in  stock  com- 
panies in  Great  Britain. 

In  Germany,  the  management  as  to  permanent  disability, 
widows'  and  children's  benefits  is  in  the  hands  of  mutual 
associations  of  employers  and  the  benefits  of  the  first  thirteen 
weeks,  in  the  hands  of  sickness  insurance  associations  in 
which  the  employees  elect  two-thirds  of  the  trustees  and  the 
employers  one-third,  and  it  has  been  found  that  the  cost 
of  management  is  even  a  little  less  than  elsewhere,  the  em- 
ployers' associations  being  at  about  the  same  rate  as  else- 
where, but  the  sickness  insurance  associations  at  a  cost  of 
about  8  per  cent. 

In  the  matter  of  prevention  it  is  everj^where  acknowl- 
edged that  the  system  in  use  in  Germany  is  by  far  the  most 
effectual,  the  employers  imposing  upon  themselves  rules 
for  avoiding  accidents  to  which  the}^  would  probably  never 
submit,  were  they  imposed  by  the  government  or  by  a  pri- 
vate insurance  company. 

That  this  is  true,  and  that  it  may  greatly  reduce  the  hazard 
is  sufficiently  shown  by  the  experience  of  the  factory  mutu- 
als  in  the  United  States  in  fire  insurance,  which  have  so 
greatly  reduced  the  hazards  that  the  cost  of  insurance  is 
frequently  one-tenth  of  one  per  cent  per  annum  or  less, 
whereas  it  used  to  be  from  2  per  cent  to  as  high  as  5  per 
cent   or   higher. 

There  is  also  no  objection  under  such  a  system  to  afford- 
ing permanent  benefits;  and  the  state  is  interested,  not  in 
having  compromises  made,  which  will  save  a  dollar  here  or 


96  SELECTED  ARTICLES 

there  for  the  funds,  but  in  having  the  benefits  so  paid  as  to 
support  all  dependents.  The  Washington  law  so  provides, 
both  as  to  disability  benefits  and  benefits  to  widows  and 
orphans. 

Another  very  great  advantage,  especiallj-  in  introducing 
such  a  plan,  may  also  be  realized  by  adopting  the  assessment 
system  as  in  Germany,  and  more  recently  in  Hungary,  under 
which  no  more  is  collected  currentlj'  than  is  currentlj'  re- 
quired to  meet   claims. 

This  would  not  be  safe  under  a  voluntary  system,  but 
under  a  compulsory  system  there  is,  of  course,  no  more  rea- 
son that  the  government  should  collect  more  of  these  taxes 
than  arc  currently  required,  than  that  it  should  collect  more 
taxes  for  any  other  purpose  than  are  currently  required. 

Under  such  a  sj'stem,  therefore,  the  cost  at  the  outset 
would  not  be  more  than  the  premiums  employers  are  paying 
at  present;  and  the  increase  would  be  so  gradual  that"  at  least 
twenty-five  years  would  elapse  before  anything  like  a  maxi- 
mum would  be  reached,  which  maximum,  likewise,  would 
obviously  still  be  very  much  less  than  under  anj^  system  of 
private  insurance. 

LTnder  such  a  system,  also,  of  course,  no  employer  could 
be  ruined,  and  thereb}'  no  dependents  deprived  of  their  ben- 
efits. 

The  question  is  raised  immediately  as  to  whether  such 
legislation  will  be  constitutional.  Sufficient  time  is  not  al- 
lotted me  to  undertake  a  discussion  of  this  question.  It  has, 
however,  from  the  beginning  seemed  to  me  that  laws  of  this 
character  have  a  much  better  chance  of  being  declared  con- 
stitutional than  any  other  laws,  excepting  possibly  those 
whicli  are  purely  optional,  and  among  such  I  hesitate  to 
include  the  quasi-optional,  which  require  choice  to  be  made 
in    order   to   remain   under   the    negligence    laws. 

This  view  I  had  formed  prior  to  1909,  after  consulting  all 
the  decisions  available.  It  has  recently  been  strongly  con- 
firmed by  the  reasoning  of  the  Court  of  Appeals  of  New 
York  in  declaring  the  workmen's  compensation  act  uncon- 
stitutional, and  by  the  decision  of  the  Supreme  Court  of  the 
United  States  in  the  Oklahoma  bank  guaranty  cases. 


COMPULSORY  INSURANCE  97 

One  result,  also,  of  the  limited  research  which  I  have 
been  able  to  make  in  the  matter  is  to  indicate  that  there  is 
even  greater  probabiHty  that  a  proper  national  act  of  this 
form  w^ould  be  declared  constitutional  than  there  is  that  sim- 
ilar acts  of  the  legislatures  of  the  different  states  would  be 
so  declared.  The  national  constitution  is  in  this  respect 
broader  as  to  the  taxing  power  than  the  constitutions  of 
most  of  the  states. 

It  is  peculiarly  desirable,  likewise,  in  view  of  the  abso- 
lutely free  trade  among  the  states  that,  if  possible,  this  legis- 
lation be  national,  in  order  that  there  may  be  no  discrimina- 
tion against  the  industries  of  one  state  in  favor  of  thos«  in 
another.  The  variation  in  rates  for  employer's  liabilitj^  in- 
surance is  now  three  to  one  or  even  four  to  one,  as  between 
industries  otherwise  alike  but  in  different  states.  This  should 
be  remedied,  not  aggravated. 

If,  therefore,  the  question,  "What  system  of  workmen's 
compensation  is  best  adapted  to  the  United  States?"  is 
to  be  answered,  as  if  it  read,  "What  system  is  best  for  the 
people  of  the  United  States?"  there  is  but  one  answer  pos- 
sible. 

If,  on  the  contrary,  it  is,  "What  system  of  workmen's 
compensation  is  most  likely  to  be  adopted,  taking  into  ac- 
count certain  prejudices  alleged  to  exist  in  the  United 
States?"  it  may  be  that  the  answer  would  be  dififerent.  Even 
of  that,  I  am  not  convinced;  for  I  do  not  believe  that  Ameri- 
can employers,  einployees  or  our  citizens  in  general,  are  in 
favor  of  doing  this  thing  in  a  wa}^  w'hich  is  certain  to  be  the 
least  effectual   and  at   the   same   time   the   most  expensive. 


Annals  of  the  American  Academy.  38:  263-6.  July,   191 1. 

Cost  of  Insurance.     jNIiles   M.  Dawson. 

The  expense  of  insurance  under  state  compulsion  is  about 
the  same  in  Norway  (straight  out  state  insurance),  in  Austria 
(with  employers  and  employees  and  the  state  participating), 
and   in   Germany    (where  the   system   is  two-fold;   one   part   run 


98  SELECTED  ARTICLES 

entirely  by  employers  with  supervision  bj'  the  state  furnish- 
ing benefits  beyond  the  first  thirteen  weeks,  and  one  cover- 
ing under  thirteen  weeks  run  by  the  employers  and  em- 
ployees). The  expense  is  about  12  per  cent  of  the  gross  col- 
lections which  in  Germany  are  really  about  the  net  amount 
currently  paid  out.  In  Norway  it  is  an  amount  sufficient  also 
to  set  by  a  reserve  to  take  care  of  the  future,  and  in  Austria 
was  intended  to  be  sufficient,  but  never  has  been.  In  Ger- 
many the  carrying  on  of  sickness  insurance  bj^  the  work- 
men's societies  costs  about  8  per  cent  onl}'. 

Private  insurance  under  workmen's  compensation  laws, 
has,  in  Great  Britain,  cost  about  50  per  cent  of  the  entire  col- 
lections, including  the  amounts  required  to  be  put  by  as  re- 
serves; which  is  fully  100  per  cent  added  to  the  net  cost.  In 
other  words,  it  is  about  eight  times  as  expensive,  from  the 
management  and  expense  standpoint.  In  England,  where 
commissions  are  lower  than  here,  the  commissions  are  equal 
to  30  per  cent  of  the  net  amount  required  to  furnish  insur- 
ance. 

In  figures,  I  take  it  that  in  the  United  States  we  shall 
have  about  as  many  dollars  to  pay  for  our  insurance,  when 
it  is  in  force,  as  marks  in  Germany.  This  is  due  to  the 
higher  purchasing  power  of  money.  If  that  should  prove  to 
be  trtie,  the  net  disbursements  should  not  l)e  less  than  400 
million  dollars,  when  it  is  in  full  swing  throughout  the 
United  States;  and  if  you  add  100  per  cent  for  private  in- 
surance expenses  j'ou  will  add  another  400  million  dollars 
to  it.  If  it  is  carried  on  imder  a  similar  system  to  that  in 
Germany,  and  other  countries,  it  can  be  carried  on  for  about 
fifty  millions  of  dollars.  I  need  not  say  to  you  that,  no  mat- 
ter what  system  you  may  use,  there  are,  in  fact,  $350,000,000 
taxes  paid  unnecessarily  for  a  service   not  required. 

In  Xew  York,  in  the  building  trades  complaint  was  made 
after  the  workmen's  compensation  act  was  passed,  because  it 
was  not  state  insurance.  When  they  found  the  rates,  made 
by  adding  the  new  charge  to  the  former  emploj^ers'  liability 
rate,  increased  to  as  high  as  20  per  cent  on  the  payroll — when 
they    faced    that,   and    realized    tliat   under    state    insurance    it 


COMPULSORY  INSURANCE  99 

probablj'  would  not  have  been  over  7  per  cent  or  8  per  cent, 
their   prejudices    fell    away    promptly. 

I  may  say  that  the  Labor  Department  at  Washington  has 
published  tables  of  the  rates  under  all  the  different  systems 
in  Europe  and  in  this  country  for  a  large  number  of  repre- 
sentative employments  in  its  September,  1910,  Bulletin. 

Another  matter  I  wish  to  call  attention  to  is  relative  to 
a  statement  by  Dr.  Talcott  Williams.  He  compared  the  cost 
under  the  German  system  for  insurance  of  employees  in  coal 
mines  in  the  last  year  of  the  twenty-four,  with  the  cost  the 
first  year,  and  he  thought  it  represented  an  eight  times  in- 
crease in  the  cost.  This  is  true  only  in  a  certain  sense.  The 
German  system  pays  all  its  benefits  in  annuities  or  pensions. 
The  result  is  that  the  first  year  there  was  only  an  average 
of  six  months'  payment  of  the  annuities  incurred  by  reason 
of  one  year's  accidents.  In  the  24th  year,  there  were  annui- 
ties to  people  who  were  injured  the  first  year,  the  second 
year,  and  every  year  up  to  the  twenty-fourth.  The  actuarial 
system  called  for  a  steady  increase  of  outlay,  not  due  to  an 
increase  in  the  risk  at  all,  but  due  to  the  actuarial  structure 
of  the  plan,  which  started  with  only  what  was  necessary  to 
pay  the  current  benefits  and  has  increased  as  the  number  of 
annuitants  from  the  previous  years  has  increased.  It  is 
estimated  that  the  ideals  when  that  law  went  into  effect  have 
been    realized. 

The  suggestion  has  been  made  of  compulsory  insurance 
with  free  choice  of  companies.  No  one  who  does  not  study 
the  subject  from  a  technical^  standpoint,  can  say  what  the  ob- 
jections to  introducing  that  system  would  be.  In  the  first 
place,  it  is  the  experience  of  all  European  countries,  where 
they  have  introduced  it,  with  state  insurance  in  competition 
with  private  insurance  companies,  that  state  insurance  has 
not  been  conducted  as  economically  as  when  given  a  monop- 
oly. It  has  been  found  advisable,  also,  as  in  Sweden,  to  em- 
ploy agents  for  the  state  companies.  The  moment,  likewise, 
that  you  give  free  choice  of  companies,  you  must  set  up  a 
voluntary  reserve  system,  a  system  of  reserve  sufficient  to 
maintain   all  the  benefits  that  j'ou  promise   to  pay.     This,  as 


loo  SELECTED  ARTICLES 

actuaries  will  certify,  is  unnecessary  under  the  compulsory 
system,  but  it  inust  be  done  under  a  voluntarj-  system,  in- 
cluding any  system  of  free  choice  of  companies.  This  in- 
volves a  great  and  sudden  increase  in  rates  instead  of  a 
gradual  one,  taking  no  more  monej'  tlian  is  currently  re- 
quired. 

Reference  has  also  been  made  to  explosives.  In  countries 
like  Great  Britain,  where  there  is  a  purely  voluntary  sj-stem, 
the  regular  companies  absolutely  refuse  to  insure,  and  con- 
sequently the  only  way  is  for  the  employer  to  bear  it  himself, 
or  for  the  employers  to  group  and  carry  on  a  mutual  system. 
In  countries  where  there  is  compulsion,  but  with  free  choice 
of  companies,  the  state  must  cover  these  risks.  Indeed,  under 
such  a  system  the  state  company  must  take  all  the  risks 
that    other    companies    refuse. 

Yet,  under  such  a  system,  which  is  in  operation  in  Sweden 
and  in  Holland,  the  state  company  is  destroying  the  private 
companies  utterly.  The  system  merely  prolongs  the  agony 
and  increases  the  expense. 

A  suggestion  has  been  made  from  the  platform  that  per- 
haps workmen  would  not  be  willing  to  contribute,  and  that 
they  should  not  be  required  to  do  so.  In  Europe,  it  has  been 
found  unwise  to  require  them  to  contribute  to  defray  the  cost 
of  industrial  accidents.  In  no  case,  except  in  Austria,  where 
their  contribution  is  fixed  at  lo  per  cent,  have  the  men  been 
required  to  contribute  to  a  fund  which  paj's  for  accidents 
occurring  while  at  work.  In  most  comprehensive  systems, 
such  as  that  of  German}',  which  covers  disabilitj'  due  to  any 
cause,  there  are  contributions  from  workmen.  Thej-  have 
been  willing  to  contribute'in  such  case,  also,  wlierever  they 
had  the  opportunity. 

I  may  add  that  many,  my  clients  and  others,  who  are 
adopting  mutual  systems  in  this  country,  have  faced  this  same 
objection,  and,  provided  workmen  were  given  broad  protec- 
tion, they  recognized  it  as  just  and  have  been  willing  to  con- 
tribute fairly.  It  all  depends  upon  whether  thej'  are  ofifered 
a  good  bargain. 

Another  statement  that  I  think  proper  to  make,  is  that  the 


COMPULSORY  INSURANCE  loi 

gentleman  who  urged  amendment  of  the  constitution  as  the 
next  step,  should  take  into  account  that  in  order  to  generally 
introduce  laws  in  that  way,  we  must  have  forty-six  separate 
states  take  action  upon  amendments  to  their  several  consti- 
tutions, and  also  upon  amendments  to  the  national  constitu- 
tion. It  would,  therefore,  be  many  years  before  we  would 
have  achieved  what  we  set  out  to   accomplish. 

One  further  remark,  also,  concerning  a  matter  of  fact. 
It  is  that  this  suggestion  concerning  national  action  calls 
forth  mj'  recollection  of  an  interview  with  the  vice-presi- 
dent of  the  German  insurance  department,  having  charge  of 
the  supervision  of  their  system.  That  gentleman,  having 
watched  very  carefully  the  conditions  the  world  over,  ex- 
pressed his  belief  that  the  one  country  in  the  world  where 
the  German  system  could  be  used  without  destructive  modi- 
fication, was  the  United  States.  One  reason  why  he  was 
of  that  opinion,  is  because  we  have  these  separate  states 
and  territories.  Germany,  as  you  all  know,  is  composed  of 
separate  kingdoms,  each  with  sovereignty  over  local  affairs 
and  under  its  own  hereditary  monarch.  A  like  situation  con- 
fronts us  in  this  respect,  that  there  must  be  free  trade  be- 
tween our  various  states.  Therefore,  we  should  have  a  uni- 
form system  throughout  the  country.  What  looked  at  first 
most  difficult  there,  has  now  proved  the  very  easiest  thing 
to  do;  and  I  am  not  without  hope  that  such  may  also  be  true 
here. 


Annals  of  the  American  Academy.  38:  271-3.  July,  1911. 

Employers  and  Compensation  Sj'stems.     Howell  Chenej'. 

I  believe  that  a  compensation  system  is  j^erfectlj-  feasible 
for  the  small  employer,  as  well  as  for  the  large  one,  if  it  is 
treated  as  anj'  other  item  of  the  cost  of  production  and  con- 
ducted with  strict  attention  to  prevention.  I  can  speak  from 
the  continuous  experience  of  a  large  business  which  started 
as  a  very  small  one  and  which  has  continuously  compensated 
accidents  arising  out  of  employment  without  regard  to  fault; 


102  SELECTED  ARTICLES 

that  such  a  practice  has  proven  it  possible  to  go  for  sixty- 
five  years  without  an  accident  suit,  and  even  without  pajiftg 
a  lawyer's  fee  because  of  personal  injuries  arising  out  of  em- 
ployment. Injuries  received  in  the  course  of  employment  have 
been  compensated  for  without  question  as  to  the  negligence 
of  a  fellow  servant,  or  the  trade  risk,  or  the  contributory 
negligence  of  the  injured  person  unless  it  were  of  a  serious 
and  wilful  nature.  This  system  was  carried  out  both  as  a 
small  firm  and  as  a  large  one.  It  was  carried  out  in  the  be- 
lief that  strict  adherence  to  the  doctrine  of  personal  fault 
could  arrive  neither  at  justice  nor  prevention. 

We  have  all  come  to  recognize  generally  that  a  large  part 
of  the  industrial  accidents  are  not  due  to  fault  in  the  sense 
that  it  is  humanly  avoidable  or  preventable,  and  that  the 
rigid  adherence  to  such  a  mistaken  principle  has  made  neither 
for  efiicient  prevention  nor  compensation.  But  the  public 
realization  of  the  injustice  of  our  old  theory  of  personal  fault 
has  lead  not  unnaturally  to  the  trying  out  of  another  fallacy; 
that  since  it  was  not  the  fault  of  the  injured  person  it  must 
be  the  fault  of  his  employer;  and  hence,  it  was  the  duty  of 
the  state  to  step  in  and  demand  compensation,  because  of 
such  assumed  or  imputed  fault  on  the  employer's  part.  Lln- 
doubtedly,  gravely  dangerous  conditions  have  existed  which 
justify  this  policy  as  a  matter  of  equity,  if  not  as  a  matter 
of  law.  But,  if  the  New  York  decision  has  freed  our  minds 
of  the  idea  that  we  can  arrive  at  a  satisfactory  measure  of 
justice  by  imputing  a  fault  generally,  when  none  may  have 
existed,  it  may  perhaps  lead  to  pointing  towards  a  truer  so- 
lution of  the  difficulty.  Since  the  courts  have  told  us  that 
we  cannot  invoke  the  police  power  for  the  protection  of 
workers,  unless  fault  exists  either  actually  or  constructively, 
we  may  finally  abandon  the  idea  of  basing  our  remedy  upon 
any  idea  of  fault  and  seek,  not  negativel3%  but  constructively 
to  legislate  for  the  protection  of  the  workingman  by  the  lay- 
ing of  a  tax  upon  all  industries  to  compensate  for  the  injuries 
due  to  the  inherent  risk  in  industry  as  a  whole,  and  justify 
such  tax  as  necessary  for  the  general  welfare. 

An    appeal    to   the    enlightened   self-interests    of   the  -com- 


COMPULSORY  INSURANCE  103 

nuuiity,  especially  to  employers,  has  justified  taxes  for  in- 
dustrial education,  for  the  physical  care  and  feeding  of  school 
children,  for  the  suppression  of  tuberculosis,  for  the  support 
of  the  poor  and  destitute,  and  for  the  maintenance  of  hospi- 
tals for  insane,  drunkards  and  other  mental  and  moral  wrecks 
of  our  industrial  system.  We  are  no  longer  justifying  our 
expensive  school  system  solely  on  the  idea  that  the  protec- 
tion of  a  citizenship  of  a  democracy  demands  the  cultivation 
of  a  higher  general  intelligence.  We  are  frankly  affirming 
that  the  protection  of  our  citizenship  depends  upon  the 
efficiency  of  its  workers,  and  are  making  large  public  ex- 
penditures for  the  cultivation  of  a  higher  efficiency.  Such 
expenditures  never  could  have  been  justified  by  an  appeal 
to  the  state  to  protect  its  workers  from  the  direful  effects 
of  ignorance  and  inefficiency  by  an  arbitrary  taking  of  money 
from  a  limited  class  of  employments  in  which  the  conditions 
might  amply  justify  such  a  course.  The  fact  that  the  courts 
have  held  that  we  cannot  impute  or  create  a  fault  where 
none  has  existed,  nor  deprive  a  man  of  his  property  without 
due  process  of  law  would  not,  at  least  to  the  lay  mind,  neces- 
sarily deny  the  right  of  imposing  a  tax  upon  all  of  the  in- 
dustries of  the  state  for  the  protection  of  the  welfare  of  all 
of  its  workers.  And  if  you  will  appeal  to  the  enlightened 
self-interest  of  employers  on  the  grounds  of  the  increased 
efficiency  of  their  workers,  which  will  result  from  such 
adequate  compensation  and  the  real  prevention  which  such 
a  tax  will  induce,  you  will  make  far  more  rapid  progress 
than  by  grieving  over  your  failure  to  invoke  the  police  power 
as  regards  a  limited  class  of  industries  l)y  imputing  a  fault 
where  none  may  have  existed. 

It  was  generally  recognized  that  even  if  it  were  possible 
to  base  compensation  upon  the  police  power  it  could  not 
have  been  made  automatic  as  being  based  upon  fault  every 
man  must  have  his  day  in  court  to  defend  himself.  It  would 
have  thus  been  subject  to  one  of  the  worst  evils  of  present 
conditions,  the  law's  excessive  expenses  and  delays.  The 
creation  of  a  state  tax  to  support  industrial  insurance  does 
not  necessitate  such  a  failure  in  methods. 


104  SELECTED  ARTICLES 

Century.  82:   118-22.  May,  191 1. 

Industrial  Indemnity.     Will  Irwin. 

We  are  struggling  along  on  a  system  of  compensation 
for  industrial  accidents  which  is  a  relic  of  the  old  hand-labor 
days,  and  which  has  worked  out  into  a  tangle  of  law,  highly 
expensive,  incredibly  complicated,  and  decidedly  unjust.  All 
the  so-called  progressive  nations  entered  the  era  of  special- 
ized labor  and  machine  production  with  legal  principles  sim- 
ilar to  ours;  all  but  the  United  States  have  either  amended 
them  or  changed  them  utterly  to  fit  the  necessities  of  tlie 
new  age. 

Ten  years  ago,  the  demand  for  a  basic  change  in  the 
spirit  of  our  law  of  accident  compensation  proceeded  solely 
from  the  more  enlightened  labor  leaders  and  "charity  work- 
ers." The  business  community,  if  it  noticed  the  problem  at 
all,  was  deadset  in  opposition.  Five  years  ago,  a  few  busi- 
ness men  awoke  to  the  fact  that  a  scientific  system  of  work- 
ing-men's compensation  must  come  in  this  country,  as  it  has 
come  in  Germany,  England,-  and  France.  Now,  employers 
as  well  as  employees  are  working  to  hasten  the  new  era;  a 
stable  and  just  form  of  industrial  indemnity  is  coming  with 
a  rush.  Three  great  corporations — The  United  States  Steel 
Corporation,  the  International  Flarvester  Company,  and  the 
Cheney  Silk  Mills — have  instituted  voluntary  systems  of 
working-men's  compensation.  Oregon,  Montana,  and  New 
York,  with  the  cooperation  of  the  more  enlightened  among 
their  employers,  have  passed  more  or  less  complete  laws  em- 
bodying the  principles  which  Germany  and  England  have  in- 
corporated into  their  codes.  Nine  other  states  have  statutes 
on  the  new  plan  before  their  legislatures.  At  least  twenty 
more  are  studying  the  matter  through  commissions  or  com- 
mittees. The  National  Association  of  Manufacturers,  the 
implacable  enemy  of  Union  labor,  has  passed  resolutions  in- 
dorsing in  a  general  way  the  principle  which  Union  labor 
was  first  to  advocate.  And  at  present  the  only  active  op- 
ponents of  a  modern  employer's  liability  law  are  a  few  old- 
time    manufacturers,    who    can    see    nothing    but    next    year's 


COMPULSORY  IXSURA.XCE  105 

dollar,  and  the  more  fanatical  or  imscrupulous  labor  leaders, 
who  wish  to  retain  the  old  code  of  laws  with  all  protection 
for  the  employer  removed.  On  this  wing  of  the  firing-line, 
the  battle  between  the  capitalist  and  the  laborer  has  nar- 
rowed down  to  a  contest  over  the  terms  of  the  agreement. 

What  is  the  basis,  and  what  are  the  terms,  of  the  present 
law  of  employer's  liability  which  afflicts  American  industry  so 
grievously?  This  we  must  understand  before  we  can  under- 
stand the  new  plan  and  the  new  era  in  the  relations  between 
the  toiler  and  the  employer.  Expressed  in  terms  of  a  lay- 
man, our  laws,  based  on  the  English  Common  Law,  generally 
declare  that  the  victim  of  an  injury  may  receive  compensa- 
tion through  tlic  courts  from  any  person  whose  carelessness 
or  criminal  intent  has  caused  his  injury.  The  employer  and 
the  emploj^ee  stand  on  equal  footing  before  this  law;  in  the 
sight  of  the  State  they  are  separate  individuals.  Another 
act  of  common  law  declares  that  the  principal  is  responsible 
for  the  act  of  his  agent.  A  railroad  switchman,  for  example, 
is  an  agent  of  the  railroad  company.  So  far,  if  any  one, 
either  passenger  or  breakman,  is  killed  or  injured  by  the  neg- 
ligence of  a  switchman,  the  company  should  l)e  liable. 

This  basic  law  recognizes,  however,  the  principle  of  "con- 
tributory negligence."  The  fact  that  the  victim,  by  careless- 
ness, by  the  lack  of  proper  precaution,  contributed  to  his 
own  injury,  may  be  used  to  deny  him  damages  or  to  mitigate 
them.  This  is  the  first  instrument  employed  ]>y  lawyers  to 
pervert  law  to  injustice;  it  is  still  tiie  stock  defense  of  cor- 
poration claim  departments  against  personal  injury  suits. 
In  itself,  however,  it  is  just. 

In  the  dawn  of  specialized  industry,  a  Lord  Chief  Justice 
of  England  laid  down  a  principle  in  the  law  of  personal 
damage  suits  which  may  be  called  delinitely  an  injustice. 
Known  as  the  "fellow-servant  act,"  it  became  part  of  the 
English  law  at  the  very  time  when  industry  was  becoming 
specialized.  The  employer  remained  responsible  for  the  act 
01  the  agent,  except  in  cases  where  the  agent  was  a  fellow- 
servant  of  the  injured  person.  That  is:  if  an  employer  of  a 
.gang  of  shovelers  left  a  manhole  open,  and  one  of  his  labor- 


io6  SELECTED  ARTICLES 

ers  fell  through  it  to  his  injury,  the  laborer  could  recover 
damages.  But  if  another  laborer  in  the  same  employ  left 
the  manhole  open,  the  injured  man  had  no  action  in  law — 
for  the  offender  and  the  victim  were  fellow-servants.  If  an 
outsider  fell  into  that  manhole,  however,  he  could  recover 
damages  no  matter  who  left  it  open;  for  in  that  case  the 
offender  was  an  agent  of  the  employer,  not  a  fellow-servant. 
That  decision,  so  carelessly  conceived  that  Lord  Abinger 
called  the  butcher  and  the  baker  fellow-servants  with  the 
butler  and  the  cook,  came  over  into  American  law.  At  one 
time  or  another  the  fellow-servant  principle  prevailed  in  all 
our  states.     To  this   day,  it  remains  in  most  of  them. 

Our  State  Supreme  Courts  have  differed  widely  in  their 
definition  of  this  doctrine.  In  one  state,  a  flagman  is  a  fel- 
low-servant with  an  engineer.  In  another,  he  is  a  part  of  the 
inanagement.  In  the  iirst  case,  an  engineer  injured  because 
the  flaginan  is  "asleep  at  the  switch,"'  cannot  recover,  though 
his  passenger  can;  in  the  other,  his  suit  against  the  company 
is  as  good  as  the  passenger's. 

There  is  little  doubt  that  Lord  Chief  Justice  Abinger  had 
domestic  service  mainly  in  mind  when  he  laid  down  his  cele- 
brated principle;  and  applied  to  domestic  or  simple  agricul- 
tural service,  there  is  justice  in  it.  Where  the  processes  are 
few  and  simple,  where  every  man  knows  his  fellow-servants, 
their  faults  and  peculiarities,  the  workman  may  be  expected 
to  look  out  for  himself.  And,  indeed,  in  that  period  industry 
had  not  gone  very  far  beyond  hand  labor.  But  the  era  of 
specialized  labor,  of  extreme  complex  machinery,  was  arriv- 
ing even  then.  Industrial  society  became  highly  interdepend- 
ent. The  safety  of  John  Dvorak,  miner,  lay  in  the  hands 
of  a  dozen  men  whom  he  did  not  know,  as,  for  example,  the 
engineer  who  hoisted  and  lowered  his  cage.  Men  had  to 
accept  employments  which  placed  them  at  the  mercy  of  fel- 
low-servants in  the  next  township  or  county.  The  electrical 
worker  could  not  know  for  himself  whether  the  engineer  in 
the  plant  away  up  in  the  mountains  was  likely  to  get  drunk 
and  send  a  fatal  current  down  a  wire  supposed  to  be  dead. 
The  engineer  of  a  through  New  York  Central  train  could  not 


COMPULSORY  IXSURAXCE  107 

know,  upon  leaving  Chicago,  that  a  fellow  engineer  at  Syra- 
cuse had  sat  up  two  nights  with  a  sick  wife  and  was  in  no 
condition  to  read  the  signals.  The  growth  of  modern  in- 
dustry made  this  law  an  injustice  almost  before  it  was  firmly 
set  in   the   statute   books. 

This  same  complexity  of  modern  industry  wrought  another 
law,  originallj'  fairly  just,  into  still  another  injustice.  I  re- 
fer to  "assumption  of  risk."  By  this  basic  principle  an  em- 
ployee cannot  be  held  liable  for  injury  received  from  a 
danger  with  which  he  is  perfectly  well  acquainted.  He  has 
the  immemorial  right  to  "quit."  That  principle  worked  well 
under  hand  labor  and  individual  industry-.  For  instance 
Farmer  Jones  keeps  a  dangerous  bull  in  his  pasture.  John 
Smith,  farm  hand,  knows  that  the  bull  is  dangerous.  If  he 
is  ordered  to  enter  the  pasture,  he  can  refuse;  if  necessary, 
he  can  give  up  his  job;  if  he  takes  the  chances,  he  does  it  at 
liis  own  fair  risk.  But  industry  grew  into  warfare,  returning 
its  inevitable  list  of  killed  and  wounded  everj^  year.  In  many 
common  trades,  it  became  necessary  to  assume  risks  that  lay 
in  the  nature  of  the  calling,  and  he  who  was  always  watch- 
ing for  his  safety  was  an  impossible  workman.  "Railroading" 
is  perhaps  our  one  greatest  specialized  industry;  and  a  cau- 
tious railroad  man  is  a  contradiction  in  terms.  The  prevail- 
ing type  of  city  building  is  erected  on  a  steel  framework; 
and  the  "bridgemen"  who  do  this  work  inust  take  all  the 
chances  of  a  soldier.  That  is  in  the  nature  of  the  craft;  a 
coward  cannot  become  a  bridgeman.  The  grim  giants  of 
steel  which  are  the  tools  of  our  little  bodies  in  this  age,  pre- 
sent so  many  complex  possibilities  of  going  wrong  that  no 
workman  may  foresee  their  dangers. 

Behold  the  law,  as  we  carried  it  over  into  an  age  for 
which  it  was  never  conceived.  Behold  now  what  a  mess  we 
made  of  its  application: 

The  injured  workman  had  only  one  recourse  beyond  the 
possible  charity  of  his  employer — the  courts.  Obviously, 
since  generally  the  employer  was  rich  and  the  employee 
poor,  the  former  had  all  the  advantage  in  "good  legal  talent." 
The  attorneys  of  the  compan)-,  the  claims  department  of  the 


io8  SELECTED  ARTICLES 

corporation,  took  advantage  of  this  complex,  ill-conceived 
tangle  of  law^s  to  throw  every  obstacle  in  the  way  of  even 
the  most  just  claims.  On  the  principle  that  the  poor  are 
woefully  given  to  the  purchase  of  shoddy  goods,  the  work- 
ing-man— in  spite  of  legal  aid  societies  formed  for  his  bene- 
tit — characteristically  ran  to  "shyster"  lawyers,  who  often 
invented  for  their  clients  cases  having  no  basis  either  in  truth 
or  injustice.  If  the  employer,  with  his  claims  department,  had 
nearly  all  the  resources  and  the  talent,  the  employee,  with 
his  shyster,  had  at  least  one  strong  hold — the  sympathy  of 
juries.  "I'll  get  it  before  the  jury,"  said  the  shyster  in  be- 
ginning a  case.  "Very  well,  I'll  appeal,"  responded  the  claims 
agent.  So  the  suits,  gathering  expense  as  they  went,  dragged 
over  two,  four,  even  five  or  six  years,  while, a  crippled  la- 
borer waited  iniproductive.  And  when  a  case  was  so  clear 
and  obvious  that  quibbles  and  appeals  could  not  beat  it,  when 
the  verdict  of  the  jury  was  finally  nailed  down  hard  and  fast, 
then  appeared  another  injustice,  this  time  against  the  em- 
ployer. Juries,  when  they  could  register  their  opinions,  had 
a  way  of  giving  ridiculously  large  verdicts.  Awards  of  ten 
or  fifteen  thousand  dollars  for  the  disabled  limb  of  a  two- 
dollar-a-day   laborer   have    not   been   uncommon. 

Then  appeared  the  indemnity  insurance  companies,  taking 
the  matter  further  away  from  a  simple  relation  between  em- 
ployer and  employee.  These  companies  were  machines.  It 
became  their  business  to  pay  the  indemnity  claims  of  the 
insured,  and  to  keep  these  claims  down  by  every  fair  method 
known  to  law.  It  was  part  of  their  policy  to  discourage 
the  habit  of  bringing  suits  for  industrial  accidents,  to  make 
the  way  to  verdicts  seem  as  rough  as  possible.  And  they 
destroyed  all  feeling  of  personal  responsibilit}"  between  the 
employer  and  emploj-ec.  "I'm  sorry  you  got  hurt,  Jim," 
said  the  superintendent.  "You're  a  good  fellow  and  a  good 
workman.  I  can't  do  anything  for  you,  though.  We're  in- 
sured, and  we  have  to  agree  not  to  give  any  special  compen- 
sation. You'll  have  to  sue;  and  I  hope  you'll  get  something." 
How  this  part  of  the  sj'stem  operated  a  modern  instance 
will   show.      A   pressman,    a   good   workman,   much   liked    and 


COAIPUT.SORV  IXSURAXCE  109 

trusted  by  tlic  management,  went  loack  to  his  shop  on  his 
Saturday  half-holiday  to  repair  a  troublesome  I)it  of  his 
press.  Part  of  his  machine  fell  on  him  and  killed  him.  It 
was  rather  a  dangerous  operation  to  perform  alone;  he  must 
have  known  the  risk  he  took.  Contributory  negligence  and 
assumption  of  risk  probabl}'  entered  into  the  case.  The 
management  wanted  to  do  something  for  his  destitute  wife 
and  family.  They  were  warned  by  the  insurance  company 
against  giving  a  dollar,  lest  it  have  an  effect  upon  the  pend- 
ing suit.  This  system  became  a  veritalde  damper  on  iiuman 
sympathy,   certain   and   pitiless. 

We  are  "talking  l)nsiness."  however;  let  us  forget  sym- 
pathy. The  point  here  is  the  wastefulness  of  the  system. 
The  money  paid  by  employers  for  industrial  accidents  drib- 
bled away  all  along  the  line  before  a  modicum  of  it  reached 
the  injured  working-man.  When  it  did  arrive,  the  beneficiary 
paid  a  greater  or  smaller  part  of  the  proceeds  for  his  own 
legal  expenses.  Then,  too,  it  was  as  uncertain  as  a  lottery, 
three  men  justly  entitled  to  compensation  receiving  noth- 
ing, while  another  drew  a  capital  prize. 

The  record  in  New  York  state,  where  the  Employers'  Lia- 
bility Commission  has  made  a  pretty  thorough  investigation, 
is  significant.  In  three  years  ten  insurance  companies,  au- 
thorized to  write  employer's  liability  insurance,  received  pre- 
miums of  $23,523,585.  They  expended  in  actual  payment  to 
employees  $8,559,795.  In  other  words,  the  employees — and 
their  lawyers — received  only  36.34  per  cent,  of  the  sum  of  the 
premiums.  Deducting  the  probable  amount  of  the  fees  and 
costs  paid  by  the  employees,  the  percentage  falls  as  low  as 
twenty-eight  or  thirty. 

Insurance  is,  of  course,  the  most  '"economical"  way  for 
the  employer  to  meet  the  problem  under  present  conditions; 
and  when  we  take  into  calculation  the  firms  not  insured,  the 
figures  are  a  little  less  startling.  But  in  1907  Z-7  employers 
in  New  York  State,  operating  under  all  kinds  of  plans,  paid 
approximately  for  industrial  compensation  $192,000;  of  which 
injured    employees    or    their    families    received    only    $80,000. 


no  '    SELECTED  ARTICLES 

Probably  the  proportion  is  generallj'  lower  in  the  South  and 
Middle  West. 

Nor  from  the  general  view  of  society  is  this  the  whole 
waste.  We  have  to  reckon  in  the  energies  of  our  somewhat 
expensive  courts — and  in  this  year  of  grace  191 1,  such  cases 
will  occupy  one  fifth  of  the  time  of  the  New  York  courts.  We 
have  to  reckon  in  the  orphan  children  thrown  prematurely 
into  industry,  with  their  uneducated  minds  and  stunted  bod- 
ies, a  drag  on  the  production  of  the  next  generation.  We 
have  to  reckon  in  the  cost  of  friction  between  employer  and 
employee.  And  still  I  am  ignoring  the  unnecessary  sufifer- 
ing  of   it   all. 

However,  as  I  said  in  beginning,  the  new  idea  has  ar- 
rived; and  only  the  old  fogies  of  the  corporations  and  the 
labor  unions  are  opposing  industrial  idemnity,  except  in 
its  small  details.  Whether  a  just  and  general  system  of 
automatic  compensation  for  all  injuries  would  cost  the  em- 
ployer more  or  less  than  the  present  system  is  a  disputed 
point.  There  are  figures  to  prove  the  case  l)oth  ways;  it  is 
something  which  we  shall  never  know  until  we  have  tried 
it.  Several  employers  who  have  adopted  a  voluntary  system 
based  on  the  European  plan,  stated  to  the  National  Civic 
Federation  that  they  pay  no  more,  by  and  large,  than  they  did 
when  thej^  left  the  matter  to  law.  Others,  on  figures  alone, 
disagree;  they  declare  that  an  automatic  system  of  employ- 
er's liability,  based  on  the  German  plan  would  so  increase 
"overhead  charges''  that  the  payment  would  have  to  be  taken 
from  the  public  in  higher  prices. 

That,  however,  is  just  what  the  methodical  and  close-liv- 
ing Germans,  with  their  talent  for  social  machiner}^  have 
long  ago  admitted — that  compensation  for  the  killed  and 
injured  should  be  a  tax  on  the  industry  itself,  collected  with 
as  little  expense  and  friction  as  possible.  By  this  principle 
they  have  turned  back  to  production  the  parasites  on  indus- 
trial idemnity;  and  they  have  preserved  to  the  body  com- 
mercial of  this  and  the  next  generation  tens  of  thousands 
of  units  lost  under  our  system — or  lack  of  system.  They 
regard   it   from   the   standpoint   of  the   State,   realizing,  as  we 


COMPULSORY  INSURANCE  iii 

must  realize,  now  that  we  have  broken  nearly  all  our  virgin 
soil,  that  competition  between  nations  is  becoming  keener  and 
closer,  and  that  the  state  which  would  win  must  subordinate 
certain  private  interests  to  the  interests  of  the  whole  body- 
commercial. 

The  German  system,  however,  is  at  present  an  impos- 
sible model  for  Americans.  We  have  not,  possibly  we  never 
shall  have,  their  minute  registration  of  births,  deaths,  resi- 
dences and  removals;  and  their  bureaucratic  government  ren- 
ders many  things  possible  to  them  which  would  be  impos- 
sible to  us.  The  question  before  legislatures  and  civic  bod- 
ies is  how  best  to  adopt  their  plan  to  our  less  settled 
conditions.  Employers'  liability  in  Germany  is  so  inter- 
twined and  interwoven  with  sick  benefits  and  old-age  pen- 
sions that  one  finds  it  difficult  to  isolate  it  for  a  simple 
statement.  Enough  to  say  that  every  employer  and  every  em- 
ployee must  insure  against  accident  in  a  state-conducted  in- 
surance company,  the  employers  carrying  more  of  the  bur- 
den than  the  employees;  and  that  the  victim  of  an  industrial 
accident,  whether  it  result  in  temporary  disability,  perma- 
nent disability  or  death,  receives  compensation  on  a  fixed 
scale,  immediately  and  automatically.  The  payments  are 
considered  a  tax  on  the  industry.  The  cost  of  administra- 
tion is  not  more  than  five  per  cent,  of  the  whole  sum;  and 
from  that  cost  Germany  pays  for  the  supervision  of  safety 
appliances. 

For  industrial  idemnity  and  industrial  safetj-  go  hand  in 
hand;  and  when  employers  are  required  to  pay  for  every 
accident  in  their  shops,  no  matter  bj'  whom  caused,  they 
will  see,  as  a  matter  of  self-protection,  that  the  safety  de- 
vices for  which  reformers  have  striven  so  long  and  usually 
so  vainly,  are  placed  and  kept  on  their  machines.  In  the 
past  twenty  years  the  raised  "set  screw"  has  caused  hun- 
dreds of  deaths  and  tens  of  thousands  of  accidents.  "Set 
screws"  can  be  set  flush  and  thereby  made  harmless  at  a  cost 
of  thirty-five  cents  a  piece;  yet  labor  unions,  charity  organ- 
izations, and  employers'  associations  have  fought  them  in 
vain.     With  the   accidents   certainly   and   irrevocably   charged 


112  SELECTED  ARTICLES 

against  the  industrj-,  the  raised  set  screw  and  all  other  un- 
necessarily dangerous  devices  would  disappear.  In  the  peril- 
ous trades,  like  railroading  and  steel  construction,  the  em- 
ployers for  their  own  interests,  would  curb  the  reckless 
trade  customs  of  their  young  employees.  So  we  should  gain 
in  lives,  and  lose  in  miseries,  as  Germany  and  England  and 
France  and  Austria  have  done.  Meantime  we  are  the  only 
civilized  people  in  the  world  who  continue  to  administer 
this  important  department  of  industry  on  the  rules  of  the 
old   hand-labor   days. 


Industrial  Engineering  and  the   Engineering  Digest.  7:   449- 
52.  June,  1910. 

Employers'    Liability   Insurance.      }kliles    AI.   Dawson. 

As  at  present  supplied  in  the  United  States,  employers' 
insurance  consists  of  an  insurance  company  undertaking  for 
a  consideration,  called  a  premium,  to  assume  the  liability  of 
the  employer  to  his  employes  who  are  injured  by  reason  of 
what  the  law  terms  negligence,  and  to  the  next  of  kin  of  em- 
ployes who  lose  their  lives  through   his  negligence. 

In  practice  it  consists  in  the  insurance  company  making 
it  a  business  to  drive  as  hard  a  bargain  as  it  can  in  the  set- 
tlement of  claims  or  to  resist  such  demands  and  defend 
against  them  in  the  courts,  if  necessary,  according  as  one 
course  or  the  other  may  seem  less  expensive,  or  for  any 
other   good    business    reason    more    desirable. 

This  system  has  not  proved  satisfactory  to  any  of  the 
parties  in  interest.  It  is  not  satisfactory  to  employers, 
because,  while  it  appeals  to  them  as  a  ready  means  of  escap- 
ing annoyance  and  occasional  excessive  verdicts,  it  involves 
the  payment  of  large  amounts  which  go  for  agency,  adjust- 
ment, home  office  and  other  expenses,  and  which  must  be 
paid  by  the  employers  in  addition  to  the  sums  that  actually 
reach  the  injured  employes  and  the  next  of  kin  of  employes 
who   are   killed.     It   is   unsatisfactory   to   the   companies,   be- 


COMPULSORY  TXSURAX'CL:  u3 

cause  they  find  that  there  is  constant  pressure  upon  thcni  to 
be  more  liberal  in  their  settlements  since  the  emplo3'er  is 
not  directly  affected  by  each  settlement,  and  at  the  same  time 
equally  constant  pressure  upon  them  to  furnish  the  insurance 
at  lower  premiums.  It  is  not  satisfactory  to  the  workmen 
and  their  next  of  kin,  because  they  are  confronted  with  a 
purely  business  proposition  at  a  time  when  there  may  be 
very  great  need,  and  when  under  the  old  conditions  the  em- 
ployer might,  and  very  likely  would,  as  a  matter  of  sym- 
pathy, contribute  to  their  relief,  even  though  not  liable  under 
the  strict  letter  of  the  law.  Another  objection  on  their  part 
is  that  litigation  is  more  expensive  to  them,  longer  drawn 
out,  more  bitterly  fought  and  the  defense  conducted  by  men 
of  special  skill  in  such  matters.  They  also  urge  that  often 
advantage  is  taken  of  their  necessities  to  drive  a  specially 
hard  bargain  without  their  l)eing  made  aware  of  their  rights 
in  the  matter. 

No  more  than  twentj^-live  years  ago  German  workmen 
were  not  regarded  as  efficient,  either  from  the  standpoint  of 
quality  or  quantity  of  product,  as  the  workmen  of  several 
other  countries,  and  particularly  Great  Britain  and  the 
United  States;  but  precisely  the  contrary  is  now  generally 
acknowledged  to  be  the  case.  It  will  interest  my  hearers,  I 
am  sure,  to  know  that  when  I  was  abroad  in  1908,  to  study 
employers'  liability  and  employers'  liability  insurance,  as 
well  as  other  schemes  for  insuring  workmen,  I  found  that 
the  superior  efficiency  of  German  workmen,  on  the  whole, 
was  very  generally  ascribed  by  everybody  to  the  system  of 
employers'  liability  insurance  which  had  lieen  introduced  in 
Germany. 

Under  the  system  which  obtained  there  before,  and  which 
was  about  the  same  as  in  this  country  at  present,  the  life  of 
the  workmen  in  many  occupations  was  a  gamble,  in  which 
the  fate  of  their  wives  and  children,  and  of  others  who  might 
be  dependent  upon  them,  was  at  stake.  They  saw  the  sever- 
est misfortune  come  to  families,  amounting  to  complete  de- 
moralization, without  any  fault  on  the  part  of  the  man  him- 
self.    At   the   present   time,   preciselj-   the   contrary   condition 


114  SELECTED  ARTICLES 

exists,  viz.,  that  the  only  way  in  which  those  dependent  upon 
the  workman  can  be  involved  in  absohitely  disastrous  misfor- 
tune is  for  him  to  become  an  idler  and  fall  out  of  the  ranks 
of  regularly  employed  wage  earners.  If  he  is  a  steady  work- 
man, and  if  any  misfortune  comes  to  him,  a  sufiftcient  finan- 
cial support  to  keep  him  and  his  family  from  the  poorhouse 
or  from  depending  upon  public  or  private  charity  is  assured. 
The  effect  of  this  upon  his  character  is  said  to  have  been 
nothing  short  of  marvelous.  Other  results  are  pointed 
to,  namely,  that  by  reason  of  the  new  conditions  there  is 
very  little  expensive  litigation,  that  the  cost  of  getting  a 
dollar  to  the  insured  workman  or  to  the  family  of  a  work- 
man who  is  killed  is  about  lo  or  12  cents  instead  of  at  least 
another  dollar,  as  in  our  own  country;  that  the  burden  on 
the  manufacturers  is  evenly  and  uniformly  distributed,  and 
that  excessive  verdicts  are  not  merely  transferred  from  the 
shoulder  of  the  individual  manufacturer  to  the  entire  trade, 
but  also  do  not  exist  at  all. 

The  general  impression  in  the  United  States  is  that  Ger- 
many has  a  system  of  state  insurance,  where  the  state  col- 
lects premiums  from  the  employers,  administers  the  funds, 
pays  the  claims,  and  in  general  manages  the  whole  affair. 
The  fact  is  precisely  the  contrary.  The  system  is  one  under 
which  the  trades  themselves  are  organized  into  mutual  trade 
associations,  to  which  every  person  or  company  engaged  in 
that  trade  is  by  law  required  to  belong,  and  which  are  man- 
aged by  their  own  members.  The  liability  to  employes  is 
transferred  from  individual  employers  to  these  trade  associa- 
tions, and  the  amount  of  liability  is  absolutely  fixed  by  law 
and  is  likewise  entirely  independent  of  questions  of  negli- 
gence, so  that  there  is.  no  quarrel  over  whether  the  employer 
is  liable  or  not.  The  only  difference  of  opinion  that  arises 
is  when  there  is  partial  disability,  the  degree  of  which  has  to 
be  determined.  While  these  associations  are  conducted  at 
an  expense  of  about  10  or  12  per  cent.,  it  is  generally  con- 
ceded that  their  effectiveness,  both  in  the  shrewd  and  care- 
ful management  of  their  business  and  also  in  bringing  about 
the  adoption  of  safety  devices  and  a  reduction  in  the  hazards 


COIMPULSORV  IXSUR.WCE  115 

ol    imlustry,   far   exceeds   that   of   any    system    wliicli    has    e\er 
been    introduced    in    any    other    country. 

Under  the  German  system  the  amount  of  liabiHly  in  event 
of  total  disablement  is  lixed  at  a  certain  proportion  of  the 
wages  and  is  payable  like  wages — that  is,  by  weekly  pay- 
ments. In  the  event  of  partial  disablement,  an  amount  pro- 
portionate to  the  impairment  of  the  earning  power  is  i)aid.  In 
the  event  of  death  a  pension  is  paid  to  the  widow  during  her 
widowhood — that  is,  until  her  death  or  re-marriage — and  a 
pension  to  each  child  until  he  reaches  sixteen  years.  These 
pensions  in  the  aggregate  must  not  exceed  the  amount  that 
the  man  would  have  received  himself  had  he  been  totally 
disabled.  This  system  1  personally  regard  as  being  the  most 
satisfactory  one  for  employers'  liability  insurance  that  can 
be  found  in  any  country.  It  could  be  introduced  here,  pre- 
cisely as  it  is  in  Germany,  only  by  means  of  legislation.  If 
there  were  such  legislation,  as  our  national  Constitution  now 
stands,  it  would  apply  only  to  individual  states  and  would 
take  efifect  in  those  states  only  when  adopted  by  their  re- 
spective  legislatures. 

The  further  question  remains:  What  can  be  done  under 
our  existing  laws  by  the  voluntary  act  of  individual  employ- 
ers or  trade  associations  of  employers,  and  what  method 
of  insurance  is  wisest  for  them?  Employers'  liability  in  its 
usual  form,  as  a  mere  means  of  escaping  liability,  is  perhaps 
as  satisfactory  as  any  other  method  now  open  to  employers. 
Its    disadvantages    are    obvious,   as    already    stated. 

There  are  but  four  other  methods  available.  One  of  these 
is  a  workmen's  collective  policy,  issued  by  an  employers'  lia- 
bility insurance  company  for  protection  of  workmen  witliout 
regard  to  liability,  the  employer  contrilniting  towards  the 
premium  and  eitlier  thereby  becoming  entitled  to  be  pro- 
tected against  his  liability,  or  else  paying  a  somewhat  re- 
duced  premium   for   protection   against   such   liability. 

Theoretically,  this  kind  of  insurance  is  much  more  de- 
sirable from  many  standpoints  than  employers'  liability  in- 
surance  alone,   but   in   practice   it   has   not   found    favor. 

The  most  recent  form  of  insurance  of  this  general  nalure 


ii6  SELECTED  ARTICLES 

is  known  as  "employers'  compensation  policy,"  nnder  which 
the  employer  is  authorized  to  compensate  his  employes  for 
injuries  sustained  without  regard  to  liability,  to  the  amount 
of  one  full  year's  wages  for  the  loss  of  two  limbs  or  the  sight 
of  both  eyes,  of  one-half  that  sum  for  the  loss  of  one  limb, 
of  one-third  the  sum  for  the  loss  of  the  sight  of  one  eye, 
and  the  amount  of  a  fixed  compensation  as  set  forth  in  a 
list  of  the  same  for  minor  injuries.  There  is  also  compen- 
sation for  temporar}'  disability  to  the  amount  of  one-half 
the  weeklj'  wages  or  salary,  for  a  limited  period  only,  and 
compensation  to  the  next  of  kin  in  the  event  of  the  death 
of  the  employe  to  the  amount  of  one  full  year's  wages.  This 
sort  of  insurance  also  provides  for  defending  the  company 
in  event  of  suit  or  for  adjusting  or  compromising  same;  in 
other  words,  protects  the  employer  against  his  liability. 
Whether  the  cost  of  the  insurance  is  to  be  paid  entirely  by 
the  employer,  or  part  by  him  and  part  by  his  employes,  both 
contributing  thereto,  the  compan}'  leaves  open  to  the  em- 
ployer. 

The  third  method  is  a  sj'stcm  of  insurance  paid  by 
monthly  premiums  and  furnishing  sick  benefits  as  well  as  ac- 
cident benefits,  the  emploj^es  either  contributing  the  whole, 
or  the  employer  making  such  contributions  as  he  may  de- 
sire. Lhider  these  policies  usually  no  arrangement  is  made 
to  relieve  the  employer  from  liability,  except  that  in  man}- 
cases  no  claim  is  made,  in  view  of  the  fact  that  the  employe 
has  been  taken  care  of  by  the  insurance.  Of  course,  where 
the  employer  contributes,  it  would  be  possible  in  some  cases 
to  get  an  agreement  with  the  employes,  relieving  him  in 
whole  or  in  part  from  his  liabilit}',  unless  the  law  or  declared 
policy  of  a  state  should  be  found  to  be  against  -so-called 
"contracting   out." 

The  fourth  method  is  by  a  mutual  insurance  fund,  created 
by  and  among  the  employes  and  supported  by  their  contribu- 
tions, either  assisted  by  contributions  on  the  part  of  the 
employer,  or  entirely  independent  of  such  contriliutions. 
Lender  this  system,  if  lilieral  contributions  arc  made  by  the 
employer,  it  is  common   for. him  cither  to  have  an  agreement 


COMPULSORY  JXSURANCE  117 

in  advance,  that  he  shall  not  i)e  held  ]ial)le  under  the  law, 
and  that  the  benefits  provided  by  the  funds  shall  be  accepted 
in  lieu  of  the  indemnity  for  which  he  might  be  held  liable 
by  law,  or  else  that  a  receipt  and  release  to  that  effect  must 
be  given  before  any  portion  of  the  benelits  provided  by  the 
insurance  fund  can  be  drawn.  This  latter  is  deemed  the 
wiser  course,  Ixtth  because  it  is  more  nearly  certain  to  be 
sustained  in  all  cases  by  the  courts,  and  also  because  it 
does  not  frighten  away  the  employes  and  cannot  in  any 
way   be  criticized  as  "contracting  out." 

It  cannot  be  said  that  any  of  these  systems  are,  except 
in  rare  cases,  at  all  to  be  compared  with  the  system  in  use 
in  Germany.  The  difficulty  with  each  of  the  first  tliree  is 
that  the  benefits  are  not  large  for  the  contributions  made. 
Relatively  large  expenses  are  unavoidable.  There  must  be 
solicitation  by  agents,  usually  not  only  of  the  employers,  but 
also  of  the  employes.  There  must  be  collection  expenses 
to  be  paid  by  commission  or  otherwise;  there  must  be  adjust- 
ment from  some  central  office — witli  the  sole  exception  of 
the  new  "employers'  compensation  policy,"  which  provides 
for  direct  settlement  of  claims — and  there  must  be  litigation, 
which  is  costly  on  both  sides.  None  of  these  three  ap- 
proaches the  fourth,  or  mutual  method,  either  in  economy  or 
in  avoiding  litigation.  Under  mutual  schemes  under  which 
employes  contribute,  and  especially  if  employers  also  con- 
tribute, there  is  usually  a  complete  provision  made  for  the 
maintenance  of  the  disabled  employe  and  his  family.  And 
since  this  provision  is  immediately  available  there  is  usually 
no  question  raised  as  to  accepting  it  and  going  forward  with- 
out calling  in  the  lawyers  or  the  courts.  The  expenses 
should  rarely  or  never  exceed  10  per  cent  of  the  amount  paid 
out  in  benefits;  whereas  it  is  not  probable  that  any  of  the 
others  can  be  operated  at  an  expense  of  less  than  from  one- 
third  to  one-half  of  the  total  amount  paid — in  other  words, 
from  50  cents  to  $1  for  each  dollar  of  benefit. 

It  is  interesting,  likewise,  to  observe  that  schemes  of 
this  general  nature,  which  in  Great  Britain  are  known  as 
establishment   funds,   were   introduced   in   all    European   coun- 


ii8  SELECTED  ARTICLES 

tries  successfully  before  there  was  an}-  change  in  the  emph^y- 
ers'  liability  laws,  and  that  the  best  of  these  establishment 
fund  schemes  were  preserved  after  the  laws  went  into  force 
and  are  recognized  to  be  on  the  whole  more  beneficial  than 
the  plans  set  up  by  law.  Thus,  even  in  Germany,  the  estab- 
lishment fund  scheme,  which  was  already  in  operation  in 
the  great  Krupp  works,  has  been  continued  and  is  regarded 
as  more  beneficial  and  more  satisfactory  on  the  whole  than 
even   the  perfected  plans   introduced   b}^   the   Government. 

There  would  be  obvious  advantages  if  the  manufacturers 
here  could  and  would  combine  to  cover  their  liability  and  to 
provide  for  their  injured  workmen  and  the  families  of  work- 
men who  are  killed,  through  their  mutual  trade  association 
or  a  subsidiary  association  connected  with  it;  and  if  this  were 
established  upon  a  sound  insurance  and  actuarial  basis,  un- 
questionably a  larger  measure  of  relief  to  the  injured  and 
the  families  of  the  dead  could  be  given  without  an  increase 
in  expenditure.  Indeed,  the  benefit  would  1)e  increased 
nearly,  if  not  quite,  fifty  per  cent  as  compared  with  the  cost 
of  employers'  liability  insurance.  Yet  these  benefits  could 
be  paid  without  an  increase  of  cost  to  the  manufacturers, 
by  permitting  and  encouraging,  or,  best  of  all,  requiring  em- 
ployes to  contribute  in  order  that  larger  benefits  might  be 
paid,  and  also  that  all  sicknesses  and  disabilities  might  be 
covered  without  regard  to  negligence,  and  also  without  re- 
gard to  whether  they  are  incurred  while  the  workmen  are 
at  work  or  while  they  are   ofif  the  .work. 

There  is  nothing  Utopian  or  altruistic  in  such  a  proposi- 
tion. It  has  been  proved  to  be  a  businesslike  thing  to  do, 
resulting  in  great  economies  directly  and  indirectly,  and  also 
in  creating  a  bodj'  of  unusually  efficient,  reliable  and  stead^^ 
workmen. 

Everybody's.  19:  522-33.  October,  1908. 

Pensioners   of   Peace.     \\'illiam   Hard. 

A  good  law  is  a  law  that  gets  men  and  women  into  the 
habit   of   doing  the   helpful  thing,   the   noble   thing,   the   right 


COMPULSORY  IXSURAXXE  119 

thing.  Nine  tenths  of  every  one  of  us  is  habit.  The  Ger- 
man Compulsory  Insurance  Law  is  a  good  law,  not  only 
because  it  hands  out  coin  and  medical  supplies  at  convenient 
times  to  injured  workmen,  but  because  it  sets  the  face  of 
the  whole  German  nation  habitually  toward  preventing  the 
crippling  and  mangling  of  human  beings,  toward  healing  the 
wounds  of  those  who,  in  spite  of  all  precautions,  have  been 
overtaken  by  the  bloody  misfortunes  of  peace,  toward  lessen- 
ing pain,  toward  spreading  happiness. 

The  difference  between  the  German  situation  and  the 
American  situation  is  the  whole  difference  between  that 
modern,  scientific,  peace-making  device  called  "Compulsory 
Insurance,"  and  that  medieval,  unscientific,  strife-breeding 
contrivance  called  "Employer's  Liability." 

Under  Compulsory  Insurance  the  remedy  for  an  accident 
is  to  get  the  victim  on  his  feet  again  as  soon  as  possible, 
and  to  think  up  the  best  way  of  preventing  all  accidents  of 
that  particular  kind  in  the  future.  Under  Employer's  Lia- 
bility the  remedy  for  an  accident  is  to  start  a  lawsuit. 

The  weapons  of  Compulsory  Insurance  are  safety-devices 
and  convalescent  homes.  The  weapons  of  Employer's  Lia- 
bility are  lawyers;  judges;  instructions  to  the  jury;  what- 
did-Blackstone-say?  doctrine  of  contributory  negligence;  17 
south-by-east  reporter  845;  the-Supreme-Court-hasn't-spoken- 
on-that-point-and-probably-it-won't-speak  -  for  -  a  -  couple  -  of 
years-yet;  doctrine  of  fellow  servant;  error-in-allowing-the- 
doctor-to-say-how-much-the-man-said-his-head-hurt-him  ;  volen- 
ti  lion    fit    injuria:    I    except:    fifth    amendment;    appeal. 

On  the  eleventh  day  of  July,  in  the  year  1890,  the  steam- 
ship Tioga  made  port  at  Chicago  and  came  up  the  Chicago 
River  as  far  as  its  dock  at  the  foot  of  Randolph  Street.  It 
carried  320  barrels  of  benzine,  naphtha,  and  gasoline  in  its 
fantail  hold.  On  top  of  these  barrels  it  had  a  lot  of  bales 
of  cotton-waste.  And  just  near  the  combing  of  one  of  the 
hatches,  leading  down  into  the  hold,  it  had  two  lamps. 
There  was  an  explosion,  and  twenty-five  workmen  were 
killed.     That  was  in  1890. 

Last    year,    in    1907,    seventeen    years    afterward,    Wirt    E. 


120  SELECTED  ARTICLES 

Humphrey,  commissioner  for  the  federal  courts  in  Chicago, 
handed  in  a  preliminary  report  on  the  subject  of  the  .Tioga 
accident.  Together  with  his  report,  he  transmitted  to  the 
judges  eleven  volumes  of  testimony,  six  of  which  liad  been 
contributed  by  witnesses  for  the  dependents  of  the  dead  men, 
and  five  by  witnesses  for  the  steamboat  company. 

The  verdict  in  the  lowest  federal  court  has  not  yet  been 
given.  After  that  there  will  be  an  appeal  to  the  Circuit 
Court  of  Appeals.  And  after  that  there  will  be  an  appeal  to 
the  Supreme  Court  of  the  United  States. 

How  have  all  these  years  been  spent?  Not  in  relieving 
the  distress  of  the  human  beings  who  were  impoverished  by 
the  accident,  but  in  trying  to  find  out  just  where  the  techni- 
cal legal  blame  lay  for  the  accident  itself.  Not  in  helping 
the  widows  and  orphans,  but  in  laboriously  endeavoring  to 
fix  the  personal  responsibility  for  the  character  of  the  cargo 
and  the  location  of  the  lamps. 

The  years  when  compensation  was  reallj^  needed  have 
now  passed.  The  widows  who  were  forced  to  beg,  they  have 
begged.  The  children  who  failed  to  get  an  education,  they 
have  failed  to  be  educated.  The  wrong  of  the  case  has  been 
done.  The  human  misery  of  the  case  has  been  endured. 
Everything  is  all  over.  Except  in  .the  courts.  Everything 
connected  with  the  case  is  finished.  Except  the  case  itself. 
The  only  thing  that  survives  is  that  thin  legal  emanation 
from  the  dead  body  of  a  human  problem  long  since  resolved 
into  its  elements.  The  ghost  of  the  Tioga  affair  still  goes 
soft-footing  along  the  corridors  of  the  Federal  Building,  but 
the  Tioga  affair  itself  breathed  its  last  warm,  human  breath 
many  years  ago. 

Let  us  now  see  what  Compulsory  Insurance  would  have 
done  with  the  same  set  of  facts.  Let  us  translate  the  whole 
tremendous  social  vision  called  "Workingmen's  Insurance," 
first  seen  by  German  economists  like  Winkelblech  and 
Schaeffle,  afterward  obeyed  and  written  into  law  by  German 
statesmen  like  Emperor  William  the  First  and  Prince  Bis- 
marck, and  now  rising  in  light  over  every  European  country 
of  any  importance;   let  us   take   that  bold,  sweeping  concep- 


COMPULSORY  IXSURANCE  121 

tion,  in  whicli  the  misfortunes  of  men  in  tlieir  millions  are 
averaged  to  form  a  composite  social  policy,  and  translate  it 
into  the  every-day  details  of  the  little  life-drama  of  some 
individual  workman  who  happened  to  be  rolling  a  barrel  on 
the  decks  of  the  Tioga  on  July  11,  1890. 

We  will  suppose  his  name  was  Smith.  And  we  will  sup- 
pose he  wasn't  instantly  killed.  He  was  only  frightfully 
burned,  especfally  about  the  eyes.  They  weren't  so  much 
afraid  at  first  that  he  would  die  as  they  were  that  he  would 
go  blind. 

The  question  is:  What  happened  to  Smith  under  a  sys- 
tem of  Compulsory  Insurance  like  the  system  they  have  in 
Germany? 

The  first  thing  that  happened  was  that  Smith  was  at  once 
removed  to  a  hospital  by  the  officers  of  his  local  sick-club. 
Smith  "belonged  to  a  club  of  that  kind.  He  had  to  belong  to 
one.     It  was  the  law. 

His  club  was  called  "The  Chicago  River  Sickness  Benefit 
Association."  All  the  men  who  worked  on  boats  or  on 
docks  along  the  Chicago  River  belonged  to  it.  And  all  the 
employers  of  those  men  belonged  to  it,  too.  The  men  paid 
two  thirds  of  the  expenses  of  the  club.  The  employers  paid 
the  other  third.  The  total  amount  of  those  expenses  de- 
pended on  how  many  cases  of  disease  and  accident  happened 
along  the   Chicago  River. 

Smith  lay  in  the  hospital  a  day,  and  then  the  doctors  de- 
cided that  they  could  cure  him  just  as  well  at  home.  So 
they  sent  him  home  and  put  him  to  bed  there,  and  came 
every  day  and  treated  his  eyes.  These  doctors  were  paid  by 
the  Chicago  River  Sickness  Benefit  Association. 

On  the  morning  of  the  fourth  day,  Smith  began  to  get 
not  only  medical  attention,  but  a  regular  money  compensa- 
tion. It  was  called  his  sick-pay.  It  amounted  to  just  one- 
half  his  regular  wages.  It  was  paid  by  the  Chicago  River 
Sickness  Benefit  Asssociation. 

Smith  began  to  be  glad  that  a  cruel  and  oppressive  gov- 
ernment had  forced  him  to  pay  weekly  premiums  to  a  sick- 
club. 


122  SELECTED  ARTICLES 

For  four  weeks  Smith  lay  on  his  bed  and  writhed  with  the 
pain  in  his  eyes,  and  his  wife  took  his  half-pay  and  fed  him 
and  the  children.  It  wasn't  very  sumptuous  eating.  Not 
much  porter-house.     Mostly  potatoes.     But  it  was  their  own. 

They  didn't  have  to  slink  into  the  office  of  the  county 
poor  agent.  They  didn't  have  to  take  the  price  of  a  week's 
food  for  hungry  stomachs  from  the  claim  agent  of  the 
owners  of  the  Tioga  and  sign  a  waiver  of  all  legal  claims 
and  say:  "Thank  you.  The  courts  might  give  us  $200  in  a 
year  or  in  iive  j^ears  or  in  a  decade  or  two,  but  we  need  $5 
now.'"  They  didn't  have  to  live  on  advances  from  some 
ambulance-chasing  lawyer  who  had  taken  up  their  case 
against  the  Tioga  company  as  a  speculative  investment  in 
legal  futures.  They  didn't  have  to  send  in  their  name  to 
the  editor  of  a  yellow  journal  in  order  to  be  able  to  eat  on 
Thanksgiving.  They  didn't  have  to  become  Case  Number 
ii,8g6  in  the  records  of  the  bureau  of  charities.  What  they 
had  was  little.  But  it  was  coming  to  them  rightfullj^  legally, 
honorably.  It  saved  them  from  the  unforgettable  humilia- 
tion, the  ineradicable  degradation,  of  benevolence. 

If  Smith  had  been  suffering  with  rheumatism  or  pneu- 
monia or  appendicitis,  he  would  have  got  his  doctors  and  his 
sick-pay  just  the  same.  In  fact,  the  sick-clubs,  as  their 
name  implies,  exist  mainly  for  the  purpose  of  relieving  the 
distress  caused  by  disease.  It  is  only  incidentally  that  they 
relieve  the  distress  caused  by  accidents.  They  take  care  of 
accident  cases  for  only  thirteen  weeks,  at  the  most. 

The  sick-clubs,  therefore,  are  only  a  temporar}^  feature 
in  the  German  scheme  of  dealing  with  accidents.  But  dis- 
eases are  just  as  much  a  part  of  every-day  industrial  life  as 
accidents.  And  the  sick-clubs  of  Germany  are  worthy,  ac- 
cordingly, of  a  little  paragraph  of  their  own  in  any  article 
devoted  to  the  pensioners  of  peace. 

Here  is   that  little   paragraph: 

In  German}'  in  the  j-ear  1904  (the  last  year  for  which 
full,  accurate  figures  are  available)  there  were  22,192  sick- 
clubs.  They  had  nearly  12,000,000  members.  And  they  pro- 
vided medical  care  and  money  compensation  for  mdrc  than 
100,000,000  days  of  sickness!     In  one  year! 


COMPULSORY  INSURANCE  123 

What  a  saving  of  human  misery  lies  in  those  figures! 
And  more  than  that.     What  a  saving  of  human  self-respect! 

But  let  us  go  back  to  Smith,  who  is  still  lying  on  his 
l)ack,  with  his  eyes  horribly  hurting  him.  He  can't  even 
open  them.  And  by  tliis  time  his  wife  is  crying  because  she 
thinks  Smith  will  never  see  again.  There  is  something  no 
human  device  can  ever  cure.  For  ever  and  ever  workmen 
will  be  blinded  by  the  accidents  of  modern  industry,  and  for 
ever  and  ever  women  will  cry  for  those  sightless  eyes.  We 
can't  stop  their  crying.  But  we  can  prevent  them  from  being 
hungry  and  from  begging.  And  some  day  we  shall  do  it 
just  as  effectively  in  T^'ttsburg  and  in  St.  Louis  as  in  Ham- 
burg and   in   Berlin. 

Along  toward  the  end  of  Smith's  fourth  week  in  bed  he 
had  a  visitor.  It  was  the  local  agent  of  "The  Great  Lakes 
Marine  Accident  Insurance  Association."  This  association 
included  all  the  owners  of  all  the  boats  plying  on  Lakes 
Ontario,  Erie,  Huron,  Superior,  and  Michigan.  It  included, 
therefore,  the  owners  of  the  Tioga. 

No  workman  belonged  to  the  Great  Lakes  Marine  Acci- 
dent Insurance  Association.  Only  employers.  It  was  en- 
tirely an  employers'  organization.  The  employers  paid  all 
the  premiums  and  elected  all  the  directors. 

The  local  agent  sat  down  at  Smith's  bedside  and  ad- 
dressed him  as  follows: 

"You  look  pretty  bad  to  me.  These  doctors  that  have 
been  coming  to  you  from  the  Chicago  River  Sickness  Bene- 
fit Association  don't  seem  to  be  helping  your  eyes  much. 
Can't  see  a  bit,  can  you?  Well,  it's  up  to  them  by  law  to 
take  care  of  you  for  thirteen  weeks.  But  I  guess  we'll  have 
to  step  in  right  now  and  take  you  ofif  their  hands.  We  can't 
afiford  to  let  you  go  blind.  If  you  lose  your  eyes,  we'll  have 
to  pay  you  a  pension  all  the  rest  of  yovu'  life.  I  guess  it's 
you  to  our  hospital." 

So  spoke  the  agent,  after  the  brutal  manner  of  his  kind. 
And  the  next  morning  the  ambulance  came  and  took  Smith 
to  a  big  hospital  on  the  West  Side. 

This  hospital  had  been   built  by  a  kind   of  Union   <if   Em- 


124  SELECTED  ARTICLES 

ployers"  Accident  Insurance  Associations.  "The  Western 
Building  Contractors'  Accident  Insurance  Association"  was 
in  it.  And  "The  Great  Lakes  Marine  Accident  Insurance 
Association."  And  "The  Illinois  Manufacturers'  Accident 
Insurance  Association."     And  a  lot  of  others. 

These  associations  were  not  run  from  Washington  by  the 
government.  They  were  run  by  their  own  members.  The 
idea  that  the  German  insurance  associations  are  managed  by 
bureaucrats  sitting  in  heavily  upholstered  and  red-tape-em- 
broidered offices  in  Berlin  is  completely  wrong.  All  that 
the  government  does  under  tlie  German  system  is  this  (and 
here  is  the  gist  of  the  whole  Compulsory  Insurance  idea): 

The  government  takes  each  industry  and  each  trade  in  the 
empire  and  says  to  the  people  who  own  it: 

"You  must  form  an  accident-insurance  association  which 
will  include  all  the  employers  in  your  industry  and  in  your 
trade.  And  you  must  pay  compensation  to  all  your  injured 
workmen  according  to  a  fixed  scale.  We  won't  stop  to  try 
to  divide  the  blame  for  accidents  between  you  and  your 
workmen.  We  will  assume  for  practical  purposes  that  you 
weren't  trying  to  commit  murder  and  that  they  weren't  try- 
ing to  commit  suicide.  We  will  assume  that  accidents  are 
accidents.  And  we  will  make  each  trade  bear  the  burden  of 
its  own  accidents.  We  will  make  each  trade  add  the  cost 
of  its  burned-out  eye-sockets  to  the  cost  of  its  burned-out 
coal-grates  in  computing  the  market-price  of  its  product. 
So  you  must  form  j-our  accident-insurance  association  in  your 
industry  and  in  your  trade,  and  3'ou  iiiiist  pay  your  injured 
workmen  the  compensation  fixed  by  law.  But  that's  where 
we  stop.  Everything  else  rests  with  you.  Go  ahead  and 
elect  your  own  officers  and  fix  your  own  details  to  suit  your- 
selves. Invent  your  own  safety-devices.  Adopt  your  own 
shop  rules.  Employ  your  own  factory  inspectors.  Engage 
your  own  doctors.  Build  your  own  hospitals.  Do  all,  or 
none,  of  these  things,  as  you  please.  Profit  by  your  own 
wisdom  and  your  own  humanity  in  preventing  accidents  and 
in  curing  their  consequences.  Lose  money  by  your  own  in- 
efficiency and  your  own  cruelty  in  letting  accidents  happen 


COMPULSORY  INSURANCE  125 

and  in  neglecting  injured  workmen.  AH  that  we  insist  up- 
on is  that  your  trade  shall  carry  its  own  load  of  the  wounded 
and  the  slain.  This  is  not  bureaucracy.  This  is  not  pater- 
nalism. It  is  trade  responsibility.  It  is  trade  self-govern- 
ment." 

But  what  about  Smith's  wife  while  Smith  lay  in  a  dark 
room  in  the  hospital?  Well,  Smith  didn't  need  to  worry 
about  her.  She  wasn't  as  well  ofif,  of  course,  as  if  he  had 
been  at  home  and  at  work.  But  she  was  at  least  three-fifths 
as  well  ofif.  She  was  drawing,  every  week,  sixty  per  cent, 
of  the  wages  Smith  used  to  earn  on  the  Tioga.  This  weekly 
compensation  was  paid  to  her  by  the  Great  Lakes  Marine 
Accident  Insurance  Association.  It  was  enough  to  keep 
Smith's  home  intact  till  Smith  could  get  back  to  it. 

Meanwhile  the  officers  of  the  Great  Lakes  Marine  Acci- 
dent Insurance  Association  had  been  looking  into  the  Tioga 
accident.  And  the  more  they  looked,  the  more  irritated  they 
became.  Bales  of  cotton-waste  on  top  of  barrels  of  gaso- 
line! Amazing!  Frightful!  A  clear  violation  of  the  by-laws 
of  the  association!  And  now.  in  consequence,  here  were 
all  these  workmen,  including  Smith,  who  had  to  be  compen- 
sated. 

So  the  Great  Lakes  Marine  Accident  Insurance  Associa- 
tion tried  the  owners  of  the  Tioga  and  fined  them  one  thou- 
sand dollars,  and  said:  "We  earnestly  regret  that  the  law 
doesn't  allow  us  to  fine  you  any  more." 

And  two  lamps  standing  near  the  combing  of  the  hatch 
leading  down  into  the  hold!  Somebody  must  have  put  those 
lamps  there.  Who  was  he?  The  officers  of  the  Great  Lakes 
Association  had  become  so  peevish  about  it  by  this  time 
that  they  had  their  inspector  spend  a  whole  week  in  finding 
out  who  that  man  was.  And,  fortunately,  when  they  found 
him.  he  was  a  man  who  had  left  the  boat  to  go  on  the  dock 
for  a  minute  or  two,  just  before  the  explosion  occurred,  and 
so  he  wasn't  dead  or  in  the  hospital.  He  was  perfectly  elig- 
ible to  be  fined,  and  they  fined  him  a-  month's  pay. 

Disciplinary  measures  of  this  kind  are  granted  by  the 
German    law   to   the   trade   insurance    associations.     Each   in- 


126  SELi:CTED  ARTICLES 

surance  association  may  make  rules  and  regulations  to  gov- 
ern its  members  and  it  maj'  discipline  its  inembers,  or  its 
members"  emplo3-ees,  for  disobeying  those  rules  and  regula- 
tions. 

That  is  to  say,  under  Compulsor}^  Insurance  the  govern- 
men  makes  private  individuals  do  much  of  its  work  for  it. 
Which  is  just  the  reverse  of  paternalism. 

In  the  year  1904,  the  German  trade  insurance  associations, 
in  order  to  make  their  rules  and  regulations  effective,  em- 
ployed 217  factory  inspectors.  These  private  factory  inspec- 
tors did  virtualljr  the  same  kind  of  work  that  is  normally 
done  by  public  factory  inspectors.  Thej-  went  about  from 
place  to  place,  within  their  trades,  and  saw  to  it  that  all  pos- 
sible safetj^-devices  were  adopted,  and  that  all  possible 
safety  regulations  were  observed.  And  their  salaries  were 
paid  out  of  the  insurance  funds  of  private  employers. 

Think  of  that!  Private  factory  inspectors!  It  doesn't 
sound  much  like  paternalism,  does  it?  •  It  sounds  a  good 
deal  like  personal  responsibility  and  private  initiative.  There 
must  be  some  vigor  in  a  system  that  sends  Germans  to  a 
heartless  extreme  of  that  kind. 

After  six  weeks  in  the  West  Side  hospital  Smith  died. 
His  death  surprised  the  doctors,  because  his  eyes  were  get- 
ting better;  but  his  constitution  had  been  eaten  away  by 
hot  days  and  damp  nights  on  the  Chicago  River,  and  he  had 
no  vitality.  The  long  confinement  and  the  agony  of  his 
burns  finished  him. 

His  funeral  expenses,  amounting  by  law  to  twenty  times 
his  daily  wages,  were  paid  by  the  Great  Lakes  Marine  Acci- 
dent Insurance  Association.  And  that  association  also  began 
immediatelj'  to  pay  a  pension  every  week  to  Smith's  family. 
It  was  sixty  per  cent,  of  the  wages  Smith  used  to  earn,  and 
it  was  due  to  keep  on  coming  as  long  as  the  widow  didn't 
marry  somebody  else,  and  as  long  as  the  children  were  too 
3^oung  to  earn  their  own  living.     ^ 

The  Smith  family  was  part  of  the  Great  Lakes  carrying 
tradel,  and  its  misfortunes,  so  far  as  they  were  caused  by 
ihe  trade,  had  to  be  borne,  at  the  least  to  the  extent  of  sixty 


COMPUT.SORV  TXSURAXCF.  127 

per  cent.,  by  the  trade  itself.  Not  by  the  bureau  of  charities; 
not  by  the  tax-payers;  not  by  Smith's  six-months-old  baby. 
But  by  the  trade. 

Is  there  some  sense  in  that  idea? 

But  we  will  suppose  Smith  didn't  die.  He  simply  lost 
both  his  eyes.  In  that  case  the  situation,  at  first,  was  worse 
than  if  he  been  carried  to  the  graveyard.  Smith,  being  blind, 
couldn't  earn  a  living  any  more  than  if  he  were  dead,  and 
yet  he  had  to  wear  clothes  and  eat  food.  So,  as  long  as  he 
remained  completely  helpless  and  as  long  as  he  needed 
special  care,  the  Great  Lakes  Marine  Accident  Insurance  Asso- 
ciation had  to  pay  him  full  wages. 

Perhaps  after  a  while,  however.  Smith,  though  he  was 
blind,  was  able  to  weave  baskets.  Then  his  pension  was 
decreased   in   proportion    to   his   earnings. 

Again,  perhaps  Smith  neither  died  nor  lost  his  eyes.  Per- 
haps he  came  through  all  right.  Perhaps  the  specialist  in 
that  West  Side  hospital  cured  him.  Perhaps  his  wife  came 
to  the  hospital  and  he  saw  her  for  the  first  time  in  thi'ee 
months,  and  they  both  laughed,  although  thej^  were  both 
pretty  thin  and  pale;  and  they  went  home  together  and 
Smith  started  back  to  work.     What  then? 

Why  then  the  Great  Lakes  Marine  Accident  Insurance 
Association  was  quit  of  the  troubles  of  the  Smith  family,  not 
because  it  had  got  Smith  to  scratch  his  name  on  a  release, 
not  because  it  had  hired  a  better  lawyer  than  Smith  could 
hire,  not  because  it  had  proved  Smith  guilty  of  being  a  fel- 
low servant  of  the  man  who  had  misplaced  the  lamps,  not 
because  it  had  appealed  the  case  from  court  to  court  till 
Smith  could  hold  out  no  longer,  not  because  it  had  defeated 
Smith  in  a  legal  battle,  but  because  it  liad  made  Smith  well 
in  a  medical  triumph. 

Which  was  the  better  victor}'  for  liuman  beings  made  in 
the  image  of  God? 

And  now  for  a  few  paragraphs  of  statistics! — An  honor- 
able writer  always  gives  fair  warning  on  such  an  occasion. 
But  these  statistics  won't  be  hard  to  read,  anyway.  They 
are  about  people.     And  besides,  they  deal  with  a  subject  that 


128  SELECTED  ARTICLES 

is  bound  to  become  a  pressing  public  question  in  tliis  coun- 
try within  the  next  few  years. 

"It  is  a  reproach  to  us  as  a  nation."  said  President  Roose- 
velt in  his  message  of  last  March,  "that  in  both  state  and 
federal  legislation  we  have  afforded  less  protection  to  both 
public  and  private  employees  than  any  other  industrial  coun- 
try in  the  world." 

A  situation  of  that  kind  cannot  long  be  permitted  to  con- 
tinue. It  is  not  only  a  reproach,  but  it  is  also  a  source  of 
internal  social  discontent  and  danger.  And  when  we  come 
to  legislate  about  it,  the  country  that  will  give  us  the  best 
lessons  will  be  Germanj-. 

In  Germany,  in  the  year  1904,  there  were  114  employers' 
trade  accident-insurance  associations  built  along  much  the 
same  lines  as  the  association  we  have  imagined  existing 
among  the  owners  of  the  carrying  trade  on  our  Great  Lakes. 
The  members  of  these  German  employers'  trade  accident- 
insurance  associations,  in  the  year  1904,  employed  some 
17,500,000  workmen.  In  other  words,  17,500,000  German 
workmen,  in  the  year  in  question,  were  protected  (to  the 
extent  outlined  above  in  Smith's  case)  against  the  conse- 
quences of  industrial  accidents. 

Compensation  was  awarded,  in  the  year  1904,  to  some 
150,000  employees  who  had  been  injured  in  the  course  of  the 
year. 

Compensation  was  also  awarded  to  some  600,000  em- 
ployees who  had  been  injured  in  previous  years,  and  who 
still  remained  totally  or  partially, incapacitated. 

And,  finally,  compensation  was  awarded  to  some  65,000 
widows  and  to  some  100,000  children  of  dead  accident  vic- 
tims. 

All  this  cost  money,  although,  of  course,  in  multitudes  of 
cases  the  accident  was  so  slight  and  the  resulting  incapacita- 
tion so  trifling  that  the  compensation  awarded  was  almost 
nominal.  However,  the  total  amount  of  compensation,  in 
the  year  1904,  reached  $30,500,000. 

So  much  for  accident-insurance.  Now  to  go  back  for  a 
minute  to   sickness-insurance. 


COMPULSORN'  INSURANCE  129 

ill  1904  the  German  sick-clubs  (the  nature  of  which  lias 
already  been  illustrated  by  our  imaginary  "Cliicago  River 
Sickness  Benefit  Association")  awarded  compensation  to  the 
extent  of  just  about  $60,250,000. 

But  the  Germans  have  a  third  form  of  Compulsory  In- 
surance, which  has  not  yet  been  mentioned.  It  is  called  in- 
validity-insurance. It  provides  small  pensions  (very  small) 
for  workmen  who  have  become  permanent  invalids  through 
sickness,  and  for  workmen  who  have  reached  the  age  of 
seventy.  The  employers  pay  half  the  premiums  of  the  inva- 
lidity-insurance funds,  and  the  employees  pay  the  other 
half.  And  the  imperial  government  adds  a  small  bonus.  The 
amount  of  compensation  awarded  by  the  invalidity-clubs  in 
1904  was,  approximately.  $35,500,000. 

The  total  cost  of  accident-insurance,  sickness-insurance, 
and  invalidity-insurance  to  the  German  empire  in  the  year 
1904  was,  in  round  numbers.  $126,250,000. 

Half  of  this  cost,  roughly  speaking,  fell  on  the  employers 
of  Germany  and  the  other  half  fell  on  the  workmen.  The 
proportion  of  expense  assigned  to  employers  and  workmen, 
respectively,  varied  from  one  kind  of  insurance  to  another, 
but  when  all  three  kinds  were  added  together  and  averaged, 
the  burden  was  just  about  equally  divided. 

Let  us  now  see  how  the  triple  insurance  idea  works  out 
in  the  case  of  some  particular  firm.  Let  us  take  the  big 
Krupp  Company  at  Essen.  This  famous  industrial  enterprise 
handles  the  heaviest  and  most  disastrous  kind  of  iron-and- 
steel  work.  Its  insurance  premiums  might  be  expected  to 
be  quite  high.  And  they  are.  From  1885  to  1902,  inclusive, 
the  insurance  premiums  paid  ])y  the  Krupp  Company  amount- 
ed to  more  than  $2,000,000. 

It  was  an  enormous  sum.  But  it  was  an  enormous  com- 
pany. The  real  test  is  to  take  the  amount  paid  in  anj-  one 
year  and  compare  it  with  the  total  pay-roll  of  that  same  year. 

Applying  this  test  to  the  Krupp  Company,  it  will  be  found 
that  in  the  year  1902  the  total  insurance  premiums  paid  by 
the  Krupp  Company  amounted  to  just  2.7  per  cent,  of  the 
total  wages   paid  by   the   Krupp   Company  to   its   employees. 


130  SELFXTFD  ARTICLES 

In  other  words,  if  a  Krupp  workman  was  earning  ten  dollars 
a  week,  the  Krupp  Company  had  to  pay  twenty-seven  cents 
every  week  in  insurance  premiums  for  him,  and  he  had  to 
pay,  roughly  speaking,   twenty-seven  cents  for  himself. 

A  charge  of  that  kind  is  not  likely  to  ruin  the  industries 
of  a  nation  nor  to  drive  its  workmen  to  armed  and  desperate 
revolt. 

And  that  twenty-seven  cents  weekly  on  every  ten  dollars 
of  wages  included  all  three  kinds  of  insurance.  It  paid  for 
sickness,  accidents,  and  invalidity.  If  tlie  circulation  be  re- 
stricted to  accidents  alone,  a  precise  estimate,  with  present 
figures,  cannot  l)e  furnished,  because,  as  has  already  been  ex- 
plained, accidents  are  paid  for  out  of  both  the  sickness  funds 
and  the  accident  funds,  and  their  true  cost  is  difficult  to  dis- 
entangle. 

By  no  stretch  of  liberality,  however,  could  it  be  computed 
that  in  the  year  igo2  the  Krupp  Company  paid  as  much  as 
two  per  cent,  on  total  wages  for  the  accident  victims  who 
were  compensated  out  of  the  sickness  funds  and  the  acci- 
dent funds  to  whicli  the  Krupp  Company  contributed. 

But  let  it  go  at  two  per  cent.  That  means  two  dollars 
on  every  hundred  dollars  of  wages  for  accidents  alone  out 
of  the  funds  of  the  company.  Was  it  a  large  charge  or  a 
small  one?  We'll,  call  it  large.  No  employer  likes  to  add 
two  per  cent,  to  his  pay-roll. 

It  should  be  remembered,  however,  that  if  Compulsory 
Insurance  costs  money.  Employer's  Liabilitj-  costs  money, 
too. 

Just  look  at  the  records  of  the  American  Employer's  Lia- 
bility companies!  They  insure  employers  against  having  to 
pay  damages  to  injured  workmen  under  our  American  Em- 
ployer's Liability  laws.  The  employers  pay  premiums  to 
the  liability  companies.  The  liabilit}^  companies  then  de- 
fend the  suits  and  satisfy  the  verdicts.  The  employers  them- 
selves are  saved  unharmed. 

Miany  employers  are  too  big  to  need  to  insure  themselves 
in  this  way.  The  railroads  and  most  of  the  "trusts"  can  look 
after  themselves.     They  would  not  he  financially  crippled  by 


CO^IPULSORY  INSURANCE  131 

even  the  biggest  kind  of  accident,  involving  hundreds  of 
workmen. 

Many  other  employers  are  too  small 'to  be  sued  success- 
fully. Or  else  they  are  engaged  in  light  work  that  doesn't 
cause  accidents.  Or  else  they  are  too  stupid  to  see  that  they 
need  insurance. 

But  from  the  remainder,  in  the  year  1906,  the  Employer's 
Liability  companies  of  America  collected  almost  $20,000,000 
in  premiums. 

That  was  not  a  negligible  sum  of  money. 

And  the  rates  charged  the  individual  employers  were  not 
negligible,  either. 

A  well-known  Chicago  manufacturer,  in  response  to  an 
inquiry  from  Everybody's  Magazine,  gives  his  rates  as  fol- 
lows: 

For  men  employed  in  his  machine-shop:  57  cents  on  every 
$100  of  wages. 

For  millwrights  engaged  in  outside  work:  $1.25  on  every 
$100  of  wages. 

For  teamsters:     $2.40  on  every  $100  of  wages. 

Just  observe  that  last  rate.  For  teamsters,  driving  horses 
on  the  streets,  2.4  per  cent,  of  their  total  wages!  Every  time 
that  manufacturer  paid  a  teamster  ten  dollars  he  had  to  pay 
his  liability  company  twenty-four  cents! 

.-Iiid  that  didn't  include  sickness.  It  didn't  include  invalidity, 
ft  zvas  just  for  accidents. 

Nor  was  that  manufacturer  engaged  in  a  particularly 
hazardous  line  of  business.  If  you  want  to  see  what  the 
really  hazardous  businesses  cost,  just  get  the  official  "Manual 
of  Liability  Insurance."  In  that  interesting  book  you  will 
find  the  official  rates,  and  if  you  knock  ofif  s;^]^  per  cent, 
(which  is  the  discount  allowed  in  many  states),  you  will  be 
left  with  the  following  charges: 

For  men  employed  in  building  street  railways:  $3.00  on 
every  $100  on  wages. 

For  men  employed  in  quarries:  $3.60  on  every  $100  of 
wages. 


132  SELECTED  ARTICLES 

For  men  employed  in  cellar-excavation:  $4.00  on  every 
$100  of  wages. 

For  men  employed  in  steel-work  on  high  buildings:  $9.00 
on  every  $100  of  wages. 

These  four  illustrations  will  be  enough.  The  rest  can  be 
found  in  the  book,  and  they  are  worth  reading  as  a  highly 
emotional  picture,  done  in  statistics,  of  the  relative  danger 
of  modern  occupations. 

Nine  dollars  on  every  $100  of  wages!  It  is  a  terrific 
charge.  And  yet  the  industry  isn't  ruined.  The  high  build- 
ings keep  on  going  up.  And  they  would  keep  on  going  up 
just  the  same  if  the  money  were  spent  in  compensating  the 
injured  workmen  instead  of  in  trying  to  prevent  them  from 
securing  compensation. 

For  why  does  Employer's  Liability  cost  so  much?  There 
are  many  reasons,  but  the  main  one  is  that  we  make  every 
accident  a  legal  fight. 

In  the  eleven  years  from  1894  to  1905,  inclusive,  the  Em 
ployer's  Liability  companies   of  America  took  in  $99,959,076 
in  premiums  from  American  employers. 

How  much  did  they  pay  out  in  compensation  to  injured 
workmen? 

Just  $43,599,498. 

Just  43.6  per  cent,  of  what  they  took  in. 

And  they  didn't  make  excessive  profits,  at  that.  Their 
business  is  highly  competitive.  The  money  was  spent  in 
getting  the  business  and  in  fighting  pitched  legal  battles 
against  the  injured  workmen's  lawyers. 

The  injured  workmen's  lawyers!  Don't  forget  them.  They 
have  to  be  paid.  Sometimes  they  get  ten  per  cent,  of  the 
proceeds.  Sometimes  they  get  twenty-five  per  cent.  Some- 
times fifty  per  cent.  Sometimes  seventy-five  per  cent.  If, 
on  the  average,  thej'  leave  the  injured  workman  two  thirds 
of  the  final  verdict,  they  are  leaving  him  more  than  most 
practical  students  of  the  subjects  think  they  are. 

And  tliey  aren't  making  excessive  profits,  either.  They 
have  to  fight  long  fights  to  get  those  verdicts. 

Nobody  is  personally  to  blame.     They  are  all   creatures 


COMPULSORY  INSURANCE  133 

of  the  system.  But  the  sad  fact  remains  that  out  of  almost 
$100,000,000  paid  by  the  employers  of  America  to  protect 
themselves  against  the  consequences  of  accidents  in  the 
eleven  years  from  1894  to  1905,  not  more  than  $30,000,000, 
after  the  injured  vv^orkmen  had  paid  their  lavv^yers,  reached 
the  pockets  of  the  injured  w^orkmen  themselves. 

Seventy  per  cent,  for  expenses!  Thirty  per  cent,  for  com- 
pensation! 

It  would  take  an  ingenious  man  to  devise  a  more  wasteful 
system. 

Compare  it  with  the  cost  of  administering  the  German 
system.  Mr.  Frank  A.  Vanderlip,  the  New  York  banker, 
after  studying  Compulsory  Insurance  as  practised  in  Ger- 
many, says  that  the  expenses  of  administration  over  there 
amount  to  less  than  ten  per  cent.  The  German  system  of 
Compulsory  Insurance  spends  ten  per  cent,  on  expenses  and 
ninety  per  cent,  on  compensation!  It  gets  ninety  out  of 
every  hundred  dollars  spent  in  insurance  premiums  right  to 
the  place  where  it  is  needed.  We  are  lucky  if  out  of  every 
hundred  dollars  we  spend  in  liability  premiums  we  get  thirty 
dollars  to  the  men  who  endured  the  accidents  in  their  flesh 
and  bone. 

The  substitution  of  the  idea  of  insurance  for  the  idea  of 
liabilitj^  of  the  idea  of  cooperation  for  the  idea  of  litigation, 
has  been  most  completely  effected  in  Germany.  But  it  has 
been  at  least  partially  effected  in  many  countries. 

Austria,  Italy,  Spain,  France,  Belgium,  Holland,  Den- 
mark, Norway,  Sweden,  Finland,  all  have  insurance  systems, 
some  of  them  compulsory,  others  voluntary,  full-grown  and 
well-developed  in  some  cases,  in  other  cases  merely  embry- 
onic, but  always  and  everywhere  officially  recognized  and 
earnstly  encouraged  by  the  national  law. 

The  idea  of  Employer's  Liability  is  a  dying  idea  in  Eu- 
rope. In  some  countries  its  obsequies  have  already  been 
performed,  and  in  all  the  others  the  pains  of  dissolution  have 
begun. 

In  Great  Britain  the  situation  is  somewhat  different.  The 
English    haven't    taken    up    Compulsory    Insurance.      Their 


134  SELECTED  ARTICLES 

method  is  what  they  call  Compulsory  Compensation.  And 
their  experience  is  particularly  interesting  because  of  the 
general  similarity  between  their  legal  institutions  and  ours. 

They  used  to  have  the  same  kind  of  Employer's  Liability 
that  we  have  now.  In  fact,  they  invented  it.  We  simply 
imported  it.  There  is  nothing  dazzlingly  original,  there  is 
nothing  endearingly  native,  about  our  present  system.  An 
American  who  suggests  changing  it  is  not  guilty  of  an  un- 
patriotic preference  for  foreign  institutions.  It  was  the  Eng- 
lish who  thought  up  the  doctrines  of  assumed  risk,  contribu- 
tory negligence,  fellow  servant,  and  all  the  rest  of  it.  What 
we  have  now  is  simply  a  legal  fashion  that  they  originated 
and  that  they  thought  was  very  beautiful  until  1897.  when 
they  put  it  up  on  the  top  back  shelf  because  it  was  [^assc, 
and  something  more  inodern  in  effect  was  needed. 

It  was  in  1897  that  the  first  British  Workmen's  Compen- 
sation act  was  passed.  This  act  (subsequently  confirmed 
and  expanded  by  the  acts  of  1900  and  1906)  established  a 
principle  that  at  first  sight  seems  to  be  harder  on  the  employ- 
er than  the  Compulsory  Insurance  system  of  Germany. 

The  German  sick-clubs,  it  will  be  remembered,  are  obliged 
to  take  care  of  accident  victims  for  a  period  varying  from 
four  to  thirteen  weeks.  Now,  these  sick-clubs,  since  two  thirds 
of  their  expenses  are  borne  by  the  workmen  themselves,  act 
as  a  kind  of  temporary  cushion  between  the  employer  and 
the  ultimate  cost  of  the  accident.  Two-thirds  of  the  cost 
of  each  accident,  for  from  four  to  thirteen  weeks  after  it 
happens,  is  borne  by  organizations  to.  which  the  employer 
contributes  only  one  third  of  the  premiums. 

In  England,  the  law  does  not  save  the  employer  to  this 
extent.  It  requires  no  contributions  of  any  kind  on  the  part 
of  the  workmen.  It  makes  the  employer  pay  the  whole  bill. 
It  gives  him.  at  most,  a  week  of  grace.  If  an  accident  re- 
sults in  an  incapacitation  of  less  than  a  week  there  is  no 
compensation  to  be  granted;  but  as  soon  as  the  second  week 
begins,  compensation  must  begin,  too,  and  if  the  incapacita- 
tion lasts  for  two  weeks  or  more,  then  the  compensation  be- 
comes retroactive  and  must  be  paid  for  the  first  week  as 
well. 


COMPULSORY  IXSURAXCE  135 

Tke  scale  of  compensation  is  that  as  long  as  a  workman 
is  kept  away  from  work  by  the  consequences  of  an  accident, 
he  shall  get  halfpay,  and  if  he  dies  his  dependents  shall  get 
a  Slim  amounting  to  three  times  his  annual  earnings. 

And  compensation  must  be  paid  no  matter  how  the  acci- 
dent was  caused.  All  accidents  inust  be  paid  for.  And  they 
must  be  paid  for  by  the  individual  employer  himself.  He  is 
personallj^  responsible  for  all  accidents  that  happen  to  his 
men.  This  hideous  assault  on  property  was  accomplished  in 
the  Parliament  of  1897  by  a  trio  of  political  adventurers, 
consisting  of  that  unbridled  visionary.  Joseph  Chamberlain, 
that  ruthless  revolutionist,  Arthur  Balfour,  and  that  red- 
handed  proletarian,  the  Marquess  of  Salisbury. 

Mr.  Chamberlain  was  the  author  of  ■^he  bill.  He  spoke 
of  the  legal  situation  then  existing  (namely,  the  same  situa- 
tion that  now  exists  in  the  United  States),  and  called  it  a 
"great  scandal." 

Mr.  Balfour  observed  that  in  his  opinion  the  only  way  to 
"dififuse  the  shock"  of  accidents,  which  fell  with  crushing 
weight  on  the  poorest  and  weakest  part  of  the  community, 
was  to  put  it  bodily  on  the  employer  and  let  him  add  it  to 
the  cost  of  his  commodities,  and  so  pass  it  on  to  consumers 
at  large. 

But  it  was  left,  as  usual,  to  Lord  Salisbury  to  infuse  solid 
argument  with  a  light  of  satire.  Most  English  manufactur- 
ers, said  Lord  Salisbury,  were  calling  the  bill  socialistic. 
They  seemed  to  him  to  be  mistaken  in  their  use  of  terms. 
Clearl}^  it  was  the  present  system  that  was  socialistic.  Under 
the  present  system,  when  a  railroad  killed  one  of  its  engi- 
neers it  passed  his  children  over  to  the  community  to  be 
supported  in  a  poorhouse  by  the  tax-payers.  That  seemed 
to  him  to  weaken  the  sense  of  personal,  private  responsibility 
that  a  railroad  company'  ought  to  have.  It  seemed  to  him 
to  cultivate  too  great  a  readiness  to  fall  back  on  the  state. 
He  was  in  favor  of  a  change  that  would  call  on  the  state  to 
do  less,  and  on  private  employers  to  do  more. 

The  government  of  1897,  w^hich  passed  the  first  Work- 
men's   Compensation    act,    was    a    Conservative    government. 


136  SELECTED  ARTICLES 

The  government  of  igo6,  which  passed  the  third  and  final 
act  on  the  subject,  was  a  Liberal  government,  strongly  sup- 
ported by  a  large  Labor  group  in  the  House  of  Commons. 

It  may  safely  be  said  that  the  policy  of  Workmen's  Com- 
pensation has  been  definitely  and  finally  accepted  by  both 
the  great  English  parties. 

English  workmen,  like  German  workmen,  are  now  able 
to  get  precisely  calculated  and  immediately  available  com- 
pensation for  their  injuries  as  long  as  those  injuries  deprive 
them  of  their  earning  power.  Unlike  German  workmen, 
however,  they  are  not  yet  protected,  as  a  body,  against  sick- 
ness. 

But  even  in  this  matter  a  start  has  been  made. 

Connected  with  the  Workmen's  Compensation  act  of  1906, 
there  is  a  "Schedule  of  Occupational  Disease."  The  work- 
man who  is  incapacitated  by  any  of  the  diseases  in  thai 
schedule  has  the  same  right  to  compensation  that  he  would 
have  had  if  he  had  met  with  an  accident. 

But  the  man's  disease,  under  the  English  law,  must  be 
one  that  is  directly  caused  by  his  trade.  A  caisson-worker 
who  just  happened  to  get  typhoid  fever  wouldn't  be  entitled 
to  compensation.  He  could  get  typhoid  fever  in  any  trade. 
It  must  be  a  disease  for  which  the  trade  itself  can  be  held 
responsible.  And  it  must  be  a  disease  mentioned  in  the 
"Schedule  of  Occupational  Diseases." 

There  are  now  twenty-four  entries  in  that  schedule. 
British  workmen  are  now  entitled  to  compensation  for  cais- 
son disease,  for  lead  poisoning,  for  mercui-y  poisoning,  for 
arsenical  poisoning,  for  phosphorous  poisoning,  for  nystag- 
mus (a  disease  of  the  eyes  caused  by  work  in  mines),  for 
poisoning  by  anilin  in  dyeing  establishments,  and  so  on 
through  a  list  of  twenty-four  specific  bodily  ailments  caused 
specificially  by  certain  modern  industrial  occupations. 

The  English  trade-disease  compensation  scheme  manifest- 
ly accounts  for  only  a  small  corner  of  the  whole  broad  field 
of  sickness  in  general,  so  comprehensively  covered  b}^  the 
German  sickness-insurance  system. 

But  even  under  the  English   scheme  no  such  case   could 


COMPULSORY  INSURANCE  137 

happen  as  recently  came  under  the  observation  of  the  New 
York  Charity  Organization  Society. 

Tliat  society  was  appealed  to  for  help  by  a  family  for 
which,  in  place  of  the  charity-society  card-catalogue  num- 
ber, we  will  imagine  the  equally  effective  disguise  of  the 
name  of  Jones. 

Mr.  Jones  was  dead  and  the  Jones  family  was  destitute. 
How  did  it  happen?  It  is  a  short  story,  very  simple,  very 
ordinar}^  very  commonplace,  and  therefore  very  instructive. 

Mr.  Jones  had  been,  first,  a  printer.  In  the  printing-shop 
where  he  worked  for  a  big  publishing  firm  an  accident  hap- 
pened to  him,  and  he  lost  a  hand.  It  was  an  ordinary,  com- 
monplace accident,  and  there  was  no  legal  claim  to  com- 
pensation.    Jones  simply  walked  out,  less  one  hand. 

He  had  to  stop  being  a  printer,  but  finally  he  got  odd- 
job  work  as  a  painter.  His  one-handedness  made  it  very 
difficult  for  him  to  keep  himself  clean  of  the  white-lead  paint. 
He  got  lead  poisoning  and  died. 

How  was  he  killed?  The  process  was  begun  by  the  print- 
ing trade  and  finished  by  the  painting  trade. 

And  hov/  was  his  destitute  family  supported?  By  the 
contributors  to  a  charity  society. 

It  seems  like  a  weird  piece  of  logic,  doesn't  it,  when  you 
look  at  it  with  eyes  not  of  established  convention  but  of  dis- 
encumbered common  sense? 

Jone's  children  are  pauperized  at  the  very  outset  of  their 
lives  because  the  printing  trade  crippled  their  father  and  the 
painting  trade  poisoned  him. 

The  cost  of  that  accident  has  not  been  escaped  simply 
because  neither  the  printing  trade  nor  the  painting  trade 
was  under  any  legal  liability  for  it.  The  cost  is  borne  by  a 
number  of  people  who,  most  of  them,  have  nothing  to  do 
with  ejther  trade.  What  a  poor  way  of  bearing  it!  What  a 
foolish,  indirect,  unjust,  expensive,  humiliating,  degrading 
way ! 

Under  any  rational  system  the  Jones  family  would  con- 
tinue to  be  an  independent,  self-respecting  family,  and  their 
legal,  honorable  indemnity  would  be  paid  to  them  by  the 
trades  that  had  caused  their  misfortunes. 


138  ■  SELECTED  ARTICLES 

It  is  time,  in  America,  for  the  community  to  stretcii  out 
a  strong  right  arm  and  readjust  the  American  Law  of  the 
Killed  and  Wounded. 

There  is  some  reason  to  believe  that  America  is  begin- 
ning to  realize.  There  are  many  evidences  that  the  con- 
science of  the  nation  is  already  stirred. 

One  of  the  most  striking  of  these  evidences  is  to  be 
found  in  the  numerous  sickness-benefit  clubs  and  accident 
benefit  clubs  promoted  by  individual  American  employers 
among  their  employees.  A  whole  article  could  be  filled  wilh 
an  account  of  clubs  of  this  kind. 

But  they  suffer  from  many  radical  defects.  They  will 
not  solve  the  question.  They  depend  on  the  individual  good- 
will of  an  individual  employer.  Or  else,  sometimes,  on  his 
desire  to  advertise  himself.  Or  else,  occasionally,  on  an 
unscrupulous,  underhanded  hope  that  by  means  of  contribu- 
tions by  employees  to  a  mutual  insurance  fund,  the  em- 
ployer himself  may  be  relieved  of  a  large  part  of  his  legal 
obligations  for  all  accidents  that  may  happen. 

Most  private  accident-insurance  schemes  are  regarded 
with  deep  distrust  by  the  employees  who  are  ordered,  by  a 
rule  of  the  firm,  to  contribute  to  them.  Those  schemes  are 
not  a  part  of  the  law  of  the  land.  They  are  not  officially 
sanctioned  by  public  policy.  They  smack  of  philanthropy, 
at  the  best;  and  of  sneaking  self-seeking,  at  the  worst. 

And .  even  if  the  best  possible  interpretation  be  placed 
on  all  of  them,  they  remain,  in  their  total,  nothing  but  an 
unusually  small  drop  in  an  unusually  large  bucket.  The 
main  mass  of  American  workmen,  whose  employers  are  just 
average  employers,  remain  totally  unaffected. 

The  only  avenue  through  which  a  broadly  satisfactory 
reformation  can  be  accomplished  is  the  community  itself; 
that  is,  the  federal  government  and  the  state  governments. 

The  timorous  reluctance  with  which  most  American  em- 
ployers still  regard  the  enactment  of  a  public  law  on  this 
subject  is  in  itself  a  confession  of  weakness.  And  like 
most  weakness,  like  most  cowardice,  it  comes  off  worse 
among  human  beings  than  strength  and  courage  would  come 
off. 


CO^IPULSORY  IXSURAXXE  i^j 

An  abominable  sj'Stem  of  accident  compensation  is  only 
one  of  many  causes  of  social  discontent  in  this  country,  but 
that  discontent  waxes  apace.  And,  mostly,  it  is  blind,  angry, 
resentful,  unconstructive.  It  is  just  discontent.  And  there- 
fore doubly  dangerous! 

A  nerveless,  palsied,  fear-stricken  refusal  on  the  part  of 
any  national  community  to  put  its  hand  to  the  root  of  social 
disorders  and  absolutely  remove  the  ground  from  which  they 
grow  will  always  bring  with  it  its  own  punishment  in  the 
way  of  unintelligent,  though  understandable,  violent,  and 
perhaps  successful  revolutionary  agitation. 

This  cowardice,  this  fear,  is  what  Emerson  was  talking 
al)out  in  his  essay  on  "Compensation"  when  he  said: 

"One  thing  Fear  teaches,  that  there  is  rottenness  where 
he  appears.  He  is  a  carrion  crow,  and  though  you  see  not 
well  what  he  hovers  for,  there  is  death  somewhere.  Our 
property  is  timid,  our  laws  are  timid,  our  cultivated  classes 
are  timid.  Fear  for  ages  has  boded  and  mowed  and  gibbered 
over  Government  and  Property.  That  obscene  bird  is  not 
there  for  nothing.  He  indicates  great  wrongs  that  must  be 
revised." 

And  among-  the  wrongs  that  must  be  revised  there  are 
few  that  go  more  deeply  into  the  marrow  of  industrial  life 
than  the  method  now  existing  in  America  for  compensating 
the  men  and  women  taken  out  of  industrial  life  and  stretched 
on  beds  of  pain  and  poverty  by  the  antics  of  the  physical, 
material  machinery  through  which  modern  civilization  is 
perpetuated. 

When  that  wrong  is  revised,  a  long  step  will  have  been 
taken  toward  social  peace  and  mutual  social  unembarrassed 
fearlessness  (which  is  the  greatest  gift  modern  national  life 
can  hold)  between  those  that  own  and  operate  property 
and  those  that  own  and  sell  labor. 

Here  and  there,  among  American  employers,  there  arises 
one  who  sees  through  the  complicated  color-plates  of  the 
present  along  the  converging  lines  of  the  picture  cast  by 
social  forces  on  the  screen  of  the  future. 

Among    such,  employers    Mr.    T.     K.    Webster,    of    the 


140  SELECTED  ARTICLES 

Webster  Manufacturing  Company,  spoke  perhaps  the  noblest, 
as  well  as  the  simplest  and  most  unstudied  and  unaffected, 
words  ever  spoken  on  the  subject  of  industrial  accidents  by 
any  American  employer  when,  in  a  little  impromptu  speech 
late  one  afternoon,  before  the  City  Club  of  Chicago,  after 
the  regularly  appointed  speakers  of  the  day  had  taken  their 
seats,  he  rose  impulsively  and  said: 

"It  is  a  matter  of  depreciation  in  men,  just  like  deprecia- 
tion in  machinery.  I  presume  there  is  not  a  manufacturer  in 
Chicago  but  what,  when  he  figures  up  his  condition  at  the 
end  of  the  year,  charges  off  a  certain  amount  for  deprecia- 
tion. It  is  the  most  natural  thing  in  the  world  that  he  should 
do  so.  His  tools  wear  out  in  from  ten  to  twenty  years,  and 
if  he  keeps  them  on  the  books  all  that  time  he  is  simply 
fooling  himself. 

"Last  year,  I  remember,  our  balance-sheet  showed  that 
we  charged  off  something  like  $20,000.  Do  I  go  grumbling 
around  and  saying  that  it  is  an  awful  thing  to  thus  charge 
off  $20,000?  Why,  no!  It  is  the  depreciation.  Now,  friends, 
in  God's  name,  why  should  we  not  allow  for  the  depreciation 
in  men? 

"We  know  that  every  thousand  pounds  of  lead  we  manu- 
facture costs  somebody  something.  The  man  who  is  breath- 
ing that  poison  into  his  lungs,  it  costs  him  something.  Now, 
should  he  and  his  children  bear  that  burden  or  should  we 
charge  it  up  against  the  industry?  Let  us  add  an  eighth  of  a 
cent  a  pound.     Let  us  distribute  it.     Who  will  know  it? 

"When  it  is  presented  to  the  American  people,  I  believe 
they  will  say  it  is  just  as  fair  to  charge  up  every  year 
the  depreciation  in  men  as  it  is  to  charge  up  the  deprecia- 
tion in  machinery  and  buildings.  And  when  we  have  done 
that,  we  will  not  only  have  done  our  duty  to  the  great  body 
of  laborers,  but  we  will  not  pay,  in  my  judgment,  a  single 
cent  more  than  we  are  paying  now. 

"We  pay  it  all  now  just  the  same.  Don't  think  for  a 
minute  we  aren't  paying  it.  We  are  paying  it  in  the  hos- 
pitals, in  the  poorhouses.  in  the  degradation,  in  the  pulling 
down   of  all   these  people,  where  they  are   swept  under  and 


COMPULSORY  INSURANCE  141 

become  the  submerged  tenth  simply  because  we  aren't  doing 
justice  to  them.  Let  us  put  upon  every  industry  the  cost  of 
the  depreciation  of  its  own  men.  And  let  us  pay  it  as  we 
would  any  other  honest  bill." 

This  speech,  like  General  Grant's  memoirs,  has  the  inimi- 
table simplicity  of  the  man.  As  for  its  style,  let  it  stand. 
It  presents,  beyond  improvement,  the  full  power  of  the 
argument  for  compensation  for  the  misfortunes  of  industrial 
life.     And  as  for  its  logic,  are  there  any  challengers? 


Injured  in  the  Course  of  Duty.  Conclusion,  pp.  172-9. 

William  Hard. 

The  question  of  compulsory  automatic  compensation  for 
all  industrial  accidents  is  no  longer  a  question.  It  is  an 
answer.     And  it  is  shouted  from  every  corner  of  the  world. 

For  the  assuagement  of  a  universal  social  ailment  there  is 
now  a  universally  recognized  social  principle,  proved  by  all 
past  experiment,  accepted  for  all  future  action,  unquestioned 
forevermore  by  any  scholar,  by  any  statesman,  of  any  repu- 
tation, in  any  country. 

It  is  a  principle  which  has  found  its  way  even  into  the 
field  of  international  diplomacy,  a  field  in  which  no  principle 
is  suffered  to  appear  till  it  has  survived  its  period  of  hungry, 
daring,  speculative  adolescence  and  has  matured  into  the 
condition  of  an  amiable,  plump  platitude. 

Sir  F.  Bertie,  from  Paris,  sends  a  communication  to  Sir 
Edward  Grey,  in  London.  It  is  "A  Dispatch  from  His  Ma- 
jesty's Ambassador,  forwarding  a  convention  between  Great 
Britain  and  France,  signed  at  Paris,  in  regard  to  Workmen's 
Compensation  for  Accidents." 

This  principle  of  automatic  compensation,  at  home  now 
in  the  correspondence  of  ancient  nations,  is  equally  a  familiar 
figure  in  the  statutes  of  regions  which  lately  were  wilder- 
nesses. 

In  the  Canadian  Northwest  His  Majesty,  by  and  with  the 
advice   and   consent   of  the   Legislative   Assembly   of   the    Prov- 


142  SELECTED  ARTICLES 

ince  of  Alberta,  enacts  a  Workmen's  Compensation  Law,  a 
law  cast  in  a  standardized  mold  from  an  international  pattern, 
a  law  which  in  the  remoteness  of  Edmonton  could  be  dis- 
cussed in  terms  of  old  understanding  by  a  sojourning  stran- 
ger from  Zurich,  a  law  which  in  effect  says  to  the  Work- 
man: "You  earn  your  living  not  only  by  the  sweat  of  your 
brow,  but  in  the  blood  of  your  heart;  you  shall  be  paid  out 
of  hand  for  both!" 

From  Alberta  the  principle  of  automatic  compensation 
traverses  the  international  boundary  line  to  the  south  and 
reappears  in  Montana.  The  Montana  legislature  establishes 
a  State  Accident  Insurance  Fund.  It  is  on  behalf  of  the 
coal  industry.  The  employers  put  in  one  cent  for  each  ton 
of  coal  mined.  The  employees  put  in  one  cent  for  each 
dollar  of  wages  earned.  The  money  is  received,  invested 
and  disbursed  by  the  state  auditor  and  the  state  treasurer. 
The  disabled  miner  gets  a  stipend  proportioned  to  his  pre- 
vious income.  The  dependents  of  the  killed  miner  receive  a 
lump  sum  of  $3,000.  It  may  be  a  skillful  application  of  the 
principle  of  automatic  compensation.  It  may  be  a  bungling 
application  of  it.  But  there  it  is.  that  principle!  It  is  in- 
evitable, because  both  intellectually  and  morally  right. 

In  Illinois  it  continues  to  advance  tmretarded  by  the 
weight  of  the  disapproval  of  the  legislature  of  1907.  Gover- 
nor Deneen  has  determined  to  appoint  a  second  industrial 
insurance  commission.  He  has  listed  the  principle  of  auto- 
matic compensation  among  his  settled  policies.  And  in  his 
"administration"  bill  for  the  construction  of  the  twenty-mil- 
lion-dollar Deep  Waterway  he  carries  that  principle  forward 
by  indirection,  insinuating  it  into  the  march  of  a  great  public 
project.  The  bill  provides  that  the  Board  of  Deep  Water- 
way Commissioners  shall  fix  a  scale  of  benefits  to  be  paid 
for  injuries  and  deaths  happening  in  the  course  of  the  work 
of  construction,  that  if  the  work  is  done  by  the  state  the 
benefits  shall  be  paid  by  the  Board,  that  if  the  work  is  done 
by  contract  everj^  contractor  shall  carry  sufficient  insurance 
to  guarantee  the  payment  of  the  benefits,  and  that  all  pay- 


COMPULSORY  INSURANCE  143 

ments  shall  be  made,  not  for  the  legal  merit  of  the  death 
or  injury  but  for  the  fact  of  it,  without  litigation. 

These  incidents,  from  Paris,  from  London,  from  AIl)crta, 
from  Montana,  from  Illinois,  arc  nothing  but  little  chips  of 
news  which  have  chanced  to  come  ashore  on  the  editorial 
desk  on  the  morning  on  which  this  pamphlet  is  being  con- 
cluded. 

Reader  of  this  pamphlet,  stand  for  just  a  moment  beside 
the  deep  stream  of  development  on  which  such  chips  of  news 
in  swelling  multitudes  are  borne.  Examine  just  a  few  of  the 
books  and  articles  to  which  allusion  has  been  made  in  the 
foregoing  pages.  Consult  just  a  few  of  the  persons  and 
organizations  mentioned.  Follow  the  course  of  the  stream, 
just  hastily,  just  summarily,  from  the  time  when  it  issued 
from  the  hard  soil  of  economic  study  in  the  books  of  the 
German  scholar  Schaeffle  to  the  time  when  it  rolled  in  a 
cataract  through  the  popular  speeches  of  Theodore  Roose- 
velt. Observe  in  the  interim  how  it  flowed  through  the  best 
minds  in  all  countries.  And  you  may  trace  its  history  be- 
fore Schaeffle,  if  you  please,  its  underground  history,  back 
into  the  deep-down,  world's  thought-supporting  works  of 
Johann  Gottlieb  Fichte,  now  a  century  below  us.  It  is  an 
old  stream  now,  with  reminiscent  scenery  on  its  banks,  re- 
cording the  labors  of  great  men  long  dead;  labors,  however, 
which  have  not  died  with  them,  for  if  you  will  pick  up  any 
bulletin  of  the  International  Labor  Association  you  will  see 
there,  as  your  eye  marks  the  close-set  references  to  reports 
and  laws  from  all  five  continents,  the  innumerable  mouths 
through  which  the  broadening  torrent  of  their  thought  is  dis- 
charging itself  into  the  sea  of  world  action. 

You  will  perceive,  after  even  casual  study,  that  this  is  no 
sudden  freshet,  no  creature  of  a  spring  rain.  You  will  per- 
ceive that  its  origin  is  deep  in  soundly  labored  theory,  that 
its  course  has  been  dug  for  it  by  informed  statesmanship, 
that  in  its  surface  history  of  forty  years  it  has  wound  its 
way  through  moxmtains  of  selfish  opposition  and  across  life- 
sucking  sands  of  popular  inertia,  and  that  nevertheless  it 
has  gained  volume  with  every  decade  till  now  it  cannot  pos- 


144  SELECTED  ARTICLES 

sibly  be  dammed,  or  even  diverted.  It  has  reached  the 
ocean.  Its  waters  vi^ash  all  human  shores.  And  they  satu- 
rate all  human  opinion  not  only  on  the  subject  of  Industrial 
Accidents,  but  also  on  the  subject  of  Sickness  and  also  on 
the  subject  of  Old  Age,  and  also  on  the  subject,  finally,  of 
Unemployment. 

For  what  does  automatic  compensation  for  accidents  pro- 
pose? It  proposes  that  out  of  our  present  income  we  shall 
lay  aside  a  fund  to  meet  coming  mishaps.  No  matter  what 
line  of  attack  an  automatic  compensation  law  may  follow,  no 
matter  whether  it  purports  to  draw  the  fund  entirely  from 
the  employer  or  even  entirely  from  the  employee,  the  issue  is 
that  it  becomes  a  charge  upon  industry  as  a  whole,  that  we 
all  contribute  to  it  in  the  cost  of  every  commodity  we  pro- 
duce and  in  the  price  of  every  commodity  we  buy,  that  we 
are  all  associated  in  a  common  prevision  and  anticipation  of 
our  future. 

So  far  from  attacking  the  present  relationship  between 
employer  and  employee,  automatic  compensation  specifically 
recognizes  it.  The  backbone  of  present  so-called  "Capital- 
ism" (namely,  the  hiring  of  the  unpropertied  class  by  the 
propertied  class  to  do  work  for  wages)  does  not,  because  of 
automatic  compensation,  lose  a  single  vertebra.  Automatic 
Compensation  has  nothing  whatever  to  do  with  Socialism,  ex- 
cept that  it  is  accomplished  under  the  supervision  of  the 
state.  So  is  war.  And  a  state  supervisor  of  an  automatic 
compensation  plan  would  have  to  be  just  about  as  much  of  a 
socialist  as  Secretary  Dickinson  is. 

Dr.  Schaefifle  (known  as  "the  father  of  industrial  insur- 
ance"), in  writing  about  the  principle  of  automatic  compen- 
sation, gave  it  its  true  name.  He  called  it  "Selbstfuersorge" 
(self-care).  It  is  the  antithesis  of  charity.  It  is  the  antithesis 
of  what  is  commonly  understood  by  "Paternalism."  For  this 
reason: 

Automatic  compensation,  in  any  form,  means  that  the 
participants  in  every  business  enterprise  have  to  make  pro- 
vision in  the  present  for  the  future;  that  they  have  to  look 
forward  and  prepare  themselves  to  meet  the  financial  shock 


COMPULSORY  INSURANCE  145 

of  mishaps  which  are  uncertain  as  to  date  but  absolutely 
certain  as  to  occurrence;  that  therefore  thej'  have  to  adopt 
the  device  of  insurance;  that  accordingly  all  the  participants 
in  the  business,  whether  employers  or  employees,  are  ob- 
liged, directly  or  indirectly,  to  pay  the  premiums  out  of 
which  the  insurance  fund  is  maintained,  and  that  finally  when 
any  of  them  are  injured  they  are  paid  not  in  mercy  by  a 
kind  lady,  not  in  paternal  beneficence  by  the  state,  but  in  the 
course  of  business  by  themselves,  in  strict  justice  out  of 
their  own  money. 

Which  brings  us  to  the  climax  of  the  whole  discussion. 

We  have  talked  in  this  pamphlet  almost  exclusively  about 
accidents.  But  if  the  principle  which  leads  to  compulsory 
insurance  against  accidents  is  once  started  on  a  free  course, 
it  plunges  onward  irresistibly  to  compulsory  insurance  against 
sickness,  to  compulsory  insurance  against  old  age,  and  pos- 
sibly at  last  to  compulsory  insurance  against  certain  phases 
of  unemployment. 

These  four  great  continuous  evils — loss  of  earning  power 
bj'  accident,  loss  of  earning  power  by  sickness,  loss  of  earn- 
ing power  by  old  age,  and  loss  of  earning  power  by  unem- 
ployment— are  the  permanent  pitfalls  which  line  the  path  of 
working  life  and  which  show  in  their  depths  an  enormous 
proportion  of  all  the  poverty  and  misery  in  the  world. 

Unemplojmient,  in  the  mass,  is  genuine.  It  is  not  im- 
agined by  the  bookworm  or  originated  by  the  hookworm. 
The  sluggard's  strenuous  flight  from  useful  exertion,  the 
tramp's  poetic  preference  for  the  vernal  roadside,  the  beg- 
gar's public  whine  for  the  price  of  a  bed  are  subordinate, 
though  eye-catching  incidents.  They  argue  a  continuous  and 
picturesque  rejection  of  opportunity.  But  the  bulk  of  un- 
employment is  neither  continuous  nor  picturesque.  It  hap- 
pens jerkily  and  unobstrusively,  in  periods  of  a  few  days  or 
a  few  weeks  at  a  time,  and  when  not  the  result  of  sickness 
or  of  bodily  accident,  is  caused  mysteriously,  with  the  quick- 
ness and  blindness  of  a  dark-driven  stiletto  stab,  by  some 
sudden  fluctuation  in  the  industrial  demand  for  labor — the 
loss  of  the  German  trade,  the  withdrawal  of  a  contract,  the 


146  SELECTED  ARTICLES 

success  of  a  rival  business  firm,  the  drop  in  the  price  of  hogs, 
the  glut  in  the  copper  market,  the  invention  of  a  new  ma- 
chine, the  mere  advent  of  a  slack  season.  The  exposition  of 
the  facts  would  require  another  pamphlet,  but  there  may  be 
found  now,  on  pages  290  to  293  of  the  Eighteenth  Annual 
Report  of  the  Commissioner  of  Labor,  a  composite  and 
conclusive  picture  of  some  of  the  elements  in  the  case. 

The  trade  conditions  which  demand  twenty  thousand  men 
in  the  packing  industry  to-day  and  only  fifteen  thousand  to- 
morrow— which  art  the  conditions  responsible  for  the  bulk 
of  Unemployment — are  no  more  controllable  by  the  employee 
tlian  are  sickness,  old  age,  or  physical  injury. 

The  applicability  of  compulsory  insurance,  combined  with 
work  bureaus,  to  the  simpler  forms  of  genuine  unemploy- 
ment is  now  being  experimentally  developed. 

Its  applicability  to  sickness,  old  age,  and  physical  injury 
is  known  and  admitted. 

For  what  is  the  sum  of  the  whole  matter  but  insecurity. 
And  what  is  the  answer  to  insecurity  but  insurance? 

Finally,  what  is  insurance  but  self-care? 

The  system  of  self-care,  as  a  whole,  however,  is  for  the 
speculations  and  debates  of  coming  years.  We  are  here 
immediately  concerned  only  with  that  part  of  self-care  which 
deals  with  physical  injury  caused  by  industrial  accidents. 

What  a  small  part!  How  radiant  with  healing  light  for 
the  misery  in  the  dark  places  of  hazardous  daily  toil,  but  still 
how  restricted  in  scope,  how  unanswerably  triumphant  in  its 
past,  how  unadventurously  certain  of  its  future! 

This  pamphlet  advocates  no  impromptu  invention  of 
amateur  philanthropists.  It  exploits  no  freshly  patented 
social-reform  novelty.  Its  unoriginal  task  has  been  to  em- 
phasize the  facts  and  to  sharpen  the  arguments  in  an  old 
field  of  industrial  statesmanship.  Its  modest  purpose  is  to 
hasten,  by  ever  so  small  a  margin  of  time,  the  day  when 
the  states  of  this  Union  will  of  necessity  adopt  a  recog- 
nized remedy  for  a  recognized  wrong. 


COMPULSORY  INSURANCE  147 

New    York.    Labor,    Department     of.     Bulletin.    39:     442-56. 
December,    1908. 

Employers'  Liability  or  Workmen's  Compensation. 

L.    W.    Hatch. 

Twenty  thousand  factory  and  shop  workers  in  this  Em- 
pire State  injured  by  accidents  in  one  year!  That,  observe, 
is  a  list  of  casualties  for  only  two  of  the  great  branches  of 
industry,  namely,  manufacturing  and  mining,  and  does  not 
represent  complete  figures  even  for  those.  No  one  can  tell 
\vhat  the  grand  total  of  killed  and  wounded  in  the  whole 
army  of  industrial  workers  in  this  state  in  a  single  year  is. 
To  know  that,  one  would  have  to  consider  the  other  great 
branches  of  industry,  especially  transportation  and  building, 
not  to  mention  agriculture,  fisheries  and  forestry  which  have 
their  hazards  also.  For  the  great  transportation  industry 
here  are  two  significant  totals  from  the  reports  of  the  Public 
Service  Commission.  For  the  year  ended  June  30,  1907, 
there  were  2,025  reported  injuries  to  employees  (449  fatal) 
on  the  steam. railroads  of  the  state.  In  the  last  six  months  of 
1907  there  were  426  casualties  to  employees  (65  fatalities)  on 
street  railways  reported  by  telephone  to  the  Commission  for 
the  first  district,  which  is  practically  New  York  City.  For 
the  building  and  construction  industry  we  know  nothing  at 
all  as  to  total  figures,  but  here  is  a  single  item  that  is  sug- 
gestive. The  Central  Federated  Union  in  New  York  City 
reported  the  other  day,  after  investigation  among  its  mem- 
bers, that  no  less  than  fifty-five  men  had  been  killed  in  the 
construction  of  the  new  Blackwell's  Island  bridge.  Mani- 
festly the  20,000  accidents  in  manufacturing  and  mining 
would  have  to  be  increased  by  thousands  more  before  one 
would  approach  the  total  of  all  industrial  accidents  in  this 
state  in  a  single  prosperous  year. 

But  that  20,000,  about  which  we  know  something  of  de- 
tail, is  sufficiently  large  to  give  us  food  for  thought.  Let 
that  thought  be  directed  for  the  present  to  the  following 
points:  First,  the  burden  imposed  by  these  accidents;  second. 


148  SELECTED  ARTICLES 

who  now  carries  that  burden;  third,  is  the  burden  now  justly 
placed;  fourth,  if  not,  where  should  it  be  placed,  confining 
ourselves  all  the  time  as  closely  as  possible  to  New  York 
State. 

First,  the  burden  entailed  by  industrial  accidents.  This 
comprises  two  elements:  the  one,  the  physical  suffering  of 
the  injured  man  and  the  mental  anguish  of  himself  or 
friends;  the  other,  the  economic  loss  of  wages  and  medical 
or  funeral  expenses.  To  get  an  idea  of  the  physical  suffer- 
ing and  mental  anguish,  note  the  extent  of  injury  suffered  in 
the  different  accidents.  The  20,000  accidents  quoted  above  is 
merely  a  round  number  based  on  the  19,431  accidents  in  fac- 
tories, shops,  mines  and  quarries  in  this  state  which  were 
reported  to  the  Bureau  of  Factory  Inspection  in  the  year 
ended  September  30,  1907.  So  far  as  could  be  judged  by 
reports  made  usually  within  a  very  brief  period  after  the 
accident  (the  law  requires  report  of  accidents  within  forty- 
eight  hours  of  occurrence),  14,298  of  these  injuries  were 
only  temporary.  But  many  of  these  temporary  injuries  were 
no  light  matter  as  to  physical  suffering.  For  example,  665 
of  them  involved  fractures  of  bone.  But  on  the  other  hand 
there  were  2,^2)^  cases  in  which  the  injury  was  plainly  per- 
manent and  in  2,053  others  the  injury  was  so  serious  as  to 
indicate  probable  permanent  results  at  the  time  of  the  report. 
Of  the  2,733  known  permanent  disablements,  in  112  there  was 
a  loss  of  one  or  both  arms,  limbs,  hands  or  feet;  in  90  cases 
the  sight  of  one  or  both  eyes  was  destroyed;  in  1,909  there 
v/as  a  loss  of  one  or  more  fingers;  in  174  cases  there  were 
permanent  internal  injuries.  Finally  there  is  a  grim  death  roll 
of  344  or  more  than  one  death  for  every  workday  in  the  year. 
It  needs  but  a  very  little  imagination  stirred  by  memory  of 
sickness  or  death  in  one's  own  home  to  make  of  these  cold 
figures  an  appalling  picture  of  pain  and  anguish.  Were  it 
not  the  present  purpose  to  be  scrupulously  unsensational,  the 
above  figures  could  be  clothed  with  detail  as  horrid  in  kind, 
though  not  in  such  mass,  as  any  battlefield  description  could 
offer,  by  simple  quotation  from  the  detailed  statement  of 
fatal  accident  cases  in  the  last  report  of  the  Bureau  of  Fac- 
tory Inspection. 


COMPULSORY  INSURANCE  149 

But  turn  now  to  the  economic  burden  entailed  by  acci- 
dents. First  of  all,  of  course,  is  the  loss  'of  wages.  The 
range  of  this  loss  in  different  cases  is  simply  unlimited.  It 
extends  all  the  way  from  the  man  who  loses  but  fifteen 
minutes  of  working  time  for  bandaging  of  a  bruise  to  the 
workman  whose  life  is  c.ut  off  and  in  whose  case  the  wage 
loss  could  be  figured  only  in  the  capitalized  earnings  of  a 
lifetime.  Information  happens  to  be  at  hand  as  to  the  loss 
of  wages  in  thirty  of  the  1907  accidents.  These  were  taken 
at  random.  Whether  they  are  typical  of  all  accidents  or  not 
is  wholly  uncertain.  On  the  one  hand  they  probably  repre-r 
sent  the  more  serious-  of  non-fatal  accidents,  but  on  the 
other  include  no  fatal  cases.  But,  however  typical,  they  will 
serve  for  concrete  illustration  of  the  point  in  hand.  The  loss 
of  working  time  in  them  varied  from  one  day  to  seventy-five 
weeks  and  in  the  latter  case  the  man  was  still  idle  at  the  time 
of  report.  For  the  thirty  cases  the  total  time  lost,  so  far  as 
could  be  known  at  the  time  of  report,  was  349  weeks.  The 
total  loss  in  wages  of  these  thirty  workers  was  in  that  time 
$4,505.  In  the  case  of  five  the  loss  was  not  over  $25.  Twelve 
lost  from  $50  to  $100  and  thirteen  over  $100,  of  whom  four 
lost  over  $400.  The  average  loss  for  the  thirty  was  $150. 
Compare  this  with  the  average  annual  wage  of  male  factory 
workers  over  sixteen  years  of  age  in  this  State  (all  of  the 
thirty  employees  above  considered  were  men  over  sixteen 
except  one),  computed  from  the  figures  of  the  federal  census 
of  manufacturers  for  1905,  which  was  $579.  It  will  be  seen 
that  the  average  wage  loss  in  these  thirty  more  serious  but 
non-fatal  accidents  was  equal  to  26  per  cent  of  the  average 
annual   wage   in    manufacturing   industries. 

But  the  loss  of  earnings  during  the  period  of  the  worker's 
total  disability  is  not  always  the  only  wage  loss.  Of  the 
thirty  injured  emplo3'ees  above  referred  to,  twelve  were  re- 
ported to  be  unable,  after  the  accidents,  to  do  the  same 
work  as  before,  and  five  returned  to  work  at  lower  wages 
than  they  were  receiving  prior  to  the  accidents.  Here  is 
indicated  for  some  cases  permanently  lowered  earning  capac- 
ity with  continuous  effect  on  wages  thereafter.     In  the  ex- 


150  SELECTED  ARTICLES 

treme  case  of  permanent  complete  disablement  such  loss 
rises  to  that  in  fatal  accidents  when,  of  course,  there  is,  for 
the  family,  a  permanent  total  loss  of  wages. 

Loss  of  wages  is  the  chief  element  in  the  financial  bur- 
den of  accidental  injuries  but  not  the  only  one.  In  addition 
there  is  the  immediate  burden  of  expense  for  medical  care, 
or  burial  in  fatal  cases.  Figures  for  such  losses  are  even 
more  meager  than  for  wage  losses,  This  point  was  definitely 
reported  in  only  thirteen  of  the  above  thirty  cases  and  in 
these  the  medical  expenses  varied  all  the  way  from  $i  to 
$1/5,  except  in  one  very  serious  case  for  which  that  outlay 
was  stated  to  have  been  $500. 

Now  the  mere  size  of  the  economic  burden  entailed  by 
accidents  suggested  above  is  not  unimpressive.  But  to  realize 
its  true  significance  it  is  necessary  to  consider  it  in  relation 
to  the  economic  position  of  the  wage  earner.  Mrs.  More,  in 
her  study  of  "Wage  Earners'  Budgets,"  found  that  in  200 
wage  earners'  families  in  New  York  City  whose  average  an- 
nual income  ($851)  was  considerably  above  that  of  the  aver- 
age male  factory  worker  over  sixteen  years  of  age  in  that 
city  ($628)  the  average  annual  surplus  of  income  over  ex- 
penditures was  $15.13.  It  was  noted  above  that  in  thirty 
accidents  taken  at  random  the  average  loss  in  wages  was 
$150.  It  was  frankly  admitted  that  it  was  entirely  uncer- 
tain how  typical  these  thirty  cases  are.  But  in  the  inter- 
ests of  statistical  caution  cut  this  average  wage  loss  in  two, 
and  you  still  have  a  loss  of  income,  to  say  nothing  of  medi- 
cal expenses,  equal  to  five  times  the  average  surplus  found 
by  Mrs.  More.  Morover,  153  of  her  200  families  had  a 
deficit  or  just  came  out  even  at  the  end  of  the  year.  In 
other  words  the  economic  burden  of  industrial  accidents 
often  falls  where  it  tends  to  press  down  immediately  to 
actual  poverty.  Mrs.  More  concluded  that  one  of  the  chief 
causes  of  dependency  in  the  families  she  investigated  was 
that  of  "illness  or  death  of  principal  wage  earner."  Among 
the  thirty  accident  cases  here  frequently  adverted  to,  and 
none  of  them  fatal  accidents,  it  actually  appears  that  in  nine, 
other  members   of  the   family,   wife   or  children,  were   com- 


CO^IPULSORV  INSURANCE  151 

pelled  to  go  to  work  or  to  wurk  harder  as  a  result  of  the 
accident.  This  was  only  the  first  fruit  of  these  catastrophies, 
such  as  could  be  seen  within  a  few  months  of  their  occur- 
rence. It  is  hardly  necessary  to  point  out  to  an  audience  ot 
those  more  or  less  expert  or  specially  interested  in  chari- 
table work  that  such  economic  burdens  often  work  out  their 
full  results  only  in  a  long  course  of  time.  To  quote  Amos 
G.  Warner  in  his  "American  Charities,"  "frequently  pauper- 
ism does  not  result  until  years  afterwards,  when  a  widowed 
mother  has  broken  down  in  the  attempt  to  support  her 
famil}',  or  when  some  aged  or  incapable  relative  has  been 
turned  adrift  from  the  incapacity  of  the  family  to  maintain 
him  longer." 

Such,  hinted  at  rather  than  adequately  described,  is  the 
burden  of  human  suffering  and  economic  loss  connected  with 
industrial  accidents.  It  is  sufiiciently  great  to  demand  as  a 
pressing  practical  problem  of  justice  and  humanity  earnest 
inquirj-  as  to  where  it  now  rests  and  whether  it  ought  to  rest 
there. 

One  part  of  the  burden  does  and  can  rest  in  only  one 
place.  The  physical  pain  and  mental  anguish,  save  in  so  far 
as  the  latter  may  be  intensified  by  the  economic  burden,  can 
by  no  means  be  shifted  from  the  injured  worker  or  his 
friends.  Concerning  this  burden  civilized  society  can  enter- 
tain but  one  ideal,  namely,  all  possible  prevention  of  acci- 
dents, which  experience  indicates  is  to  be  attained  primarily 
by  means  of  vigorously  enforced  factory  laws  for  the  safe- 
guarding of  work  places,  together  with  the  education  af- 
forded by  museums  of  safety  devices. 

But  the  economic  burden,  whose  first  incidence  is  also 
upon  the  injured  workman  or  his  friends,  may  be  shifted. 
It  has  already  been  indicated  that  not  infrequently  some 
part  of  the  burden  ultimately  comes  upon  society  at  large  in 
the  form  of  public  charity  due  to  the  dependence  of  injured 
workmen  or  their  families.  This,  however,  amounts  rather 
to  an  alleviation  of  the  ultimate  effects  of  the  burden  than 
to  an  actual  shifting  of  it  and  is  but  a  drop  in  the  bucket  at 
the    most.      The    main    question    concerns    the    shifting    of    the 


152  SELECTED  ARTICLES 

burden  from  employee  to  employer.  This  actually  occurs 
at  present  in  one  of  two  ways;  by  voluntary  assumption  of 
some  part  of  the  burden  by  the  employer  or  by  compulsory 
assessment  of  it  upon  him  as  matter  of  law. 

Voluntary  assumption  of  the  burden  by  employers  oc- 
curs in  various  ways.  Frequently  it  takes  the  direct  forms 
of  payment  of  wages  in  full  or  in  part  during  disability,  or 
payment  of  some  or  all  of  the  medical  expenses,  or  simple 
donation  of  a  lump  sum,  or  some  combination  of  these 
forms.  A  not  uncommon  form  of  voluntary  assistance  ap- 
pears in  employees'  benefit  associations,  or  relief  depart- 
ments, paying  accident  benefits  to  which  the  employer  con- 
tributes either  in  cash  or  by  free  services  of  administration. 
Sometimes  an  employer  will  insure  his  employees  collect- 
ively with  a  commercial  insurance  company  and  pay  some 
part  of  the  premiums  himself.  Finally,  in  a  few  rare  cases, 
employers  maintain  a  regular  system  of  compensation  of 
their   own  without   cost  to   employees. 

To  what  extent  the  financial  burden  of  accidents  is  thus 
transferred  from  worker  to  employer  by  the  voluntary  in- 
itiative of  the  latter  in  these  various  ways,  we  are  unfor- 
tunately without  precise  information.  Some  evidence  on 
this  point  is  afforded,  however,  by  the  following  figures 
from  the  report  of  the  State  Bureau  of  Labor  Statistics  for 
1899.  Therein,  for  a  total  of  1.657  cases,  it  was  found  that 
the  employer  paid  wages  in  full  in  14  per  cent  of  the  cases, 
wages  in  part  in  2J4  per  cent,  medical  expenses  in  1% 
per  cent,  medical  expenses  and  some  other  assistance  in 
54  of  I  per  cent,  and  all  costs  of  the  accident  in  2%  per 
cent.  In  8  per  cent  of  the  cases  it  was  reported  that  as- 
sistance was  received  from  an  employers'  and  employees 
mutual  benefit  association,  and  in  3  1/5  per  cent  from  an 
insurance  company.  Too  much  ought  not  to  be  assumed 
as  to  the  general  applicability  of  these  proportions.  But 
if  it  be  borne  in  mind  that  they  represent  only  non-fatal 
accidents  and  that  in  the  case  of  mutual  benefit  associations, 
relief  departments  and  workmen's  collective  insurance  the 
great  bulk  of  accident  relief  is,  as  a  matter  of  fact,  paid  by 


COMPULSORY  INSURANCE  153 

the  employees  themselves,  and  if  allowance  be  made  for 
the  use  of  nominally  "voluntary"  assistance  as  a  means  of 
escape  from  legal  liability,  it  seems  safe  to  infer  that  the 
portion  of  the  economic  burden  of  industrial  accidents  now 
voluntarily  assumed  by  employers  in  this  State  is  but  a 
small  fraction  of  the  whole. 

But  is  there  not  hope  that  with  advancing  enlightenment 
of  employers  as  to  their  obligation  for  the  welfare  of  their 
employees  there  will  be  an  extension  of  this  voluntary  as- 
sumption of  the  burden?  To  this  question  the  best  evi- 
dence available  does  not  afford  a  hopeful  answer.  Pass- 
ing over  an  inherent  defect  in  much  of  such  voluntary 
assistance,  due  to  its  menace  to  the  workers'  independence, 
a  fundamental  difficulty  in  the  way  of  its  extension  lies  in 
the  fact  that  voluntary  assistance,  if  it  is  to  meet  the  need 
at  all  adequately,  must  be  freed  entirely  from  the  element 
of  uncertainty,  which  now  attaches  to  much  of  it,  and  must 
take  the  form  of  a  fixed  and  permanent  system  for  all  ac- 
cidents. The  financial  risk  involved  in  such  a  system  is 
too  great  for  any  but  the  very  strongest  employers  to  carry 
individually,  so  that  for  employers  generally  some  form  of 
associated  insurance  would  be  indispensable.  Any  move- 
ment in  this  direction  short  of  a  general  one  for  a  given 
industry  would  break  down  before  the  economic  law  that 
the  level  of  competition  tends  to  be  controlled  by  the 
standard  of  the  least  liberal  employer.  No,  admirable  as 
the  idea  may  appear,  that  employers  generally  will  volun- 
tarily cooperate  and  assume  the  burden  of  industrial  acci- 
dents, it  must  be  classed  as  a  dream  which  is  nearer  the 
millennium  than  the  present  day. 

This  brings  us  to  the  vital  question  in  the  whole  matter. 
How  much  of  the  economic  burden  of  accidents  does  so- 
ciety, through  the  voice  of  law,  say  the  workman  may,  as  of 
right,  shift  to  the  employer,  and  is  society  now  doing  jus- 
tice in  this  matter? 

The  law  which  answers  this  question  in  New  York 
State  is  found  in  the  common  law  of  employers'  liability 
for  accidents  to  employees  as   it  has  been  slightly  modified 


154  SELECTED  ARTICLES 

hy^  two  statutes;  one,  the  act  of  1902,  known  as  the  Em- 
ployers' Liability  Act,  the  other  an  act  of  1906,  usually  re- 
ferred to  as  the  Railway  Liability  Act.  Stripped  of  legal 
phrase,  and  ignoring  minor  qualifications,  the  law  says  to 
the  injured  workman  essentially  this:  Your  employer  must 
exercise  due  care  for  your  safety  while  at  work,  as  to  place, 
materials,  appliances,  competent  fellow  workmen,  and  rules 
for  conduct  of  the  work,  the  care  due  being  such  as  a 
reasonably  prudent  man  would  ordinarily  exercise.  At  the 
same  time  you  and  your  fellow  workmen  must  exercise  due 
care  to  avoid  danger.  If  now  you  can  prove  that  the  acci- 
dent was  caused  by  some  negligence  of  your  employer  as 
to  the  above  duty  and  can  also  prove,  if  necessary,  that  you 
yourself  did  not  neglect  to  be  careful,  in  any  such  way  as  to 
lead  to  the  accident,  and  that  none  of  your  fellow  workmen 
(other  than  superintendents,  foremen  or  those  controlling 
the  movement  of  trains)  did,  then  you  may  claim  as  legal 
right  that  the  economic  burden  of  the  accident  shall  be 
shifted  to  the  employer.  This  right  you  must  assert  and 
prove,  however,  in  a   civil  suit. 

Let  us  see  now  how  this  works  in  practice  and  how 
much  good  it  does  the  injured  workman.  Note  first,  that 
the  method  of  determining  the  workman's  right  places  him 
and  his  employer  in  an  antagonistic  attitude  and  that  they 
do  not  stand  on  equal  terms  in  the  contest.  Damage  suits 
are  never  calculated  to  induce  friendly  relations  between 
the  litigants,  and  a  suit  between  employer  and  employee, 
quite  as  likely  as  not,  pits  a  man  earning  only  a  bare  sub- 
sistence, or  a  widow  close  to  poverty,  against  an  opponent 
(be  it  the  employer  or  an  insurance  company  who  insures 
him  against  this  liability)  with  plenty  of  capital  at  his  back. 
An  illustration  of  the  possible  results  of  this  inequalit}'  of 
financial  position  is  afforded  by  a  case  of  which  the  par- 
ticulars happen  to  be  at  hand,  in  which  an  emploj^ee,  who 
had  been  two  months  idle  as  the  result  of  an  injury  and 
who  proposed  to  bring  suit,  was  threatened  by  the  employer 
with  dismissal  if  he  did,  and  being  in  pressing  need  of  wfork 
was  thus  forced  to  abandon  the  action. 


COMPULSORY  IXSURANCE  155 

In  the  second  place  the  method  is  full  of  vexatious  un- 
certainty and  cruel  delay.  The  question  of  negligence  must 
be  determined  according  to  the  circumstances  of  each  case 
and  the  circumstances  of  different  accidents  vary  almost  in- 
linitel)-,  with  scarcely  any  two  precisely  alike.  The  result 
is  that  in  the  effort  to  interpret  what  fulfils  that  wholly 
indefinite  requirement  of  "reasonable"  care  under  constant- 
I3'  varying  circumstances,  judges  themselves,  to  say  nothing 
of  juries,  constantly  fall  into  error  resulting  in  constant  ap- 
peals and  new  trials.  Three  years  is  generally  accepted  as 
about  the  average  time  required  at  present  to  finally  de- 
termine such  suits  in  New  York  State.  Meantime  the  in- 
jured workman  or  his  family  is  carrying  the  whole  burden 
of  the  accident,  whereby  such  a  thing  as  the  following, 
noted  by  chance  in  the  daily  paper,  becomes  only  too  pos- 
sible. A  news  item  in  1907,  slightly  condensed,  reads  thus: 
"Yesterday  the  Appellate  Di-vision  reversed  judgment  and 
granted  a  new  trial  in  the  action  brought  by  Margaret 
Wren  to  recover  $10,000  for  the  death  of  her  husband,  who 
died  from  the  effects  of  burns  received  by  the  contents  of 
a  ladle  filled  with  molten  iron  falling  upon  his  head  and 
body  on  December  26,  1900.  Mrs.  Wren  has  six  children, 
all  of  whom  are  depending  upon  her  for  support."  Fur- 
ther, the  amount  of  damages  which  may  be  recovered  for  a 
given  injury  is  wholly  dependent  upon  the  will  of  juries, 
resulting  largely  in  guess  work,  often  influenced  by  senti- 
ment, so  that  damages  awarded  for  the  loss  of  a  leg  have 
been  known  to  vary  in  nine  different  suits,  from  $5,000  to 
$35,000,  with  no  two  alike. 

In  the  third  place  the  method  is  enormously  expensive 
and  only  a  fraction  of  what  employers  pay  out  ever  reaches 
the  point  of  need,  namely,  the  injured  workman.  Litiga- 
tion is  notoriously  costly  for  all  parties.  It  is  common  for 
employers  to  insure  themselves  with  commercial  insurance 
companies  against  their  liability  to  pay  damages  to  injured 
workmen  so  that  in  case  of  accident  and  suit  the  insurance 
•  company  defends  the  case  and,  if  it  loses,  pays  the  damages. 
In    1905   the  employers   in   this    state   paid   out   in    premiums 


156  SELECTED  ARTICLES 

for  such  insurance  $4,381,634  but  the  insurance  companies 
paid  to  injured  workmen  for  damages  only  $1,393,931.  In 
other  words  two-thirds  of  what  the  employers  paid  out 
went  to  the  insurance  companies  to  pay  the  expenses  of 
their  business  or  profits.  But  still  worse,  the  other  one- 
third  did  not  all  reach  the  injured  workman  by  any  means. 
According  to  those  well  informed  in  the  matter,  the  average 
contingent  fee  received  by  plaintiffs'  attorneys  in  suits  of 
this  kind  is  between  a  third  and  a  half  of  the  amount  re- 
covered. Verily,  whatever  of  the  economic  burden  of  indus- 
trial accidents  is  actually  shifted  from  the  shoulders  of  the 
injured  workman,  through  his  legal  right,  doubles  or  trebles 
itself,  if  not  more,  by  the  time  it  reaches  the  employers' 
shoulders. 

But  finally,  in  the  fourth  place,  as  a  matter  of  fact  the 
present  legal  right  of  workmen  can,  at  the  best,  shift  only 
10  to  15  per  cent  of  the  burden  of  accidents  from  their 
shoulders.  That  is  the  commonly  accepted  estimate  of  the 
proportion  of  all  accidents  in  which  there  is  any  hope  for 
the  workman  of  proving  negligence  on  the  part  of  the  em- 
ployer. 

So  then,  we  have  arrived  at  this:  Society  at  present  in 
New  York  State  leaves  85  per  cent  of  the  economic  burden 
of  industrial  accidents  on  the  shoulders  of  the  injured  work- 
er or  his  family  save  for  a  very  limited  possibility  of  volun- 
tary sharing  of  the  burden  by  the  employer.  Now  why  is 
this  burden  thus  left  in  the  great  majority  of  cases  upon 
the  injured  workman?  Is  it  because  85  out  of  every  100 
victims  of  accidents  have  failed  to  exercise  the  "due  care" 
which  the  law  requires  of  employee  as  well  as  employer,  as 
described  above?  No,  for  while  it  is  true  that  many  work- 
men are  injured  through  their  own  carelessness,  wherever 
statistics  on  the  point  have  been  collected  they  prove  con- 
clusively that  in  the  great  majority  of  cases  accidents  are  not 
caused  by  the  victims'  carelessness.  Thus  for  nearly  50,000 
cases  in  five  years  investigated  in  Austria,  in  only  26  per 
cent  could  the  accident  be  ascribed  to  the  fault  of  the  vic- 
tim.    German  statistics   show  similar  results.     For  a  major- 


COMPULSORY  INSURANCE  •  IS7 

ity  of  the  cases  then  the  question  still  remains:  How  is 
this  leaving  of  the  burden  on  the  injured  workman  or  his 
friends  justified?  The  simple  truth  is,  it  is  not  justified. 
It  is  simply  left*  there  as  the  result  of  a  legal  anachronism. 
The  common  law  of  employers'  liability  holds  that  the 
ordinary  risks  of  an  occupation,  after  the  employer  has  dis- 
charged his  duty  of  exercising  reasonable  care,  are  volun- 
tarily assumed  by  the  workman  when  he  enters  the  occupa- 
tion, on  the  theory  that  one  who  wittingly  encounters  a 
danger  must  take  the  consequences  if  he  is  injured;  the  as- 
sumption being  that  a  workman  of  average  intelligence  un- 
derstands the  danger  and  is  free  to  seek  other  employment 
if  he  does  not  care  to  incur  such  danger,  the  supposition 
being  also  that  the  workman  in  hazardous  occupation  re- 
ceives a  higher  wage  to  compensate  him  for  the  extra 
risk.  Now,  without  wasting  any  time  on  the  legal  subtle- 
ties of  the  argument,  the  vital  defect  in  the  whole  thing  is 
that  it  is  historically  out  of  date.  The  doctrine  became 
established  in  the  common  law  long  before  present  condi- 
tions of  work  existed  or  were  dreamed  of.  This  was  in  the 
days  before  the  industrial  revolution  when  hand  work  in 
small  shops  prevailed,  with  the  few  dangers  inherent  in  the 
work  plainly  obvious  and  practically  in  the  hands  of  the 
workman  as  to  control  and  under  an  industrial  organization 
in  which  the  artisan  was  nearly  as  independent  economical- 
ly as  the  master.  Since  those  days  the  revolution  wrought 
by  steam  and  machinery  has  transformed  the  workshop  in- 
to the  factory  where  high  power,  swift  machines,  largely 
beyond  his  control,  surround  the  workman  on  every  hand 
and  under  an  industrial  organization  in  which  the  ability  of 
workmen  freely  to  choose  or  reject  occupations  Virith  a  view 
to  escape  their  risks,  or  to  secure  higher  wages  as  compen- 
sation therefor,  are  myths.  Mechanical  occupations  have 
become  so  generally  hazardous  that  for  a  great  mass  of 
v/orkers  it  is  these  or  none,  while  that  they  are  compen- 
sated for  the  hazard  by  a  higher  wage  is  wholly  disproven 
by  almost  any  wage  statistics.  In  a  word,  while  the  work- 
man's  legal   rights   in  the   matter  have   remained    stationary 


158  SELECTED  ARTICLES 

the  necessary  environment  of  his  work  has  constantly 
grown  more  dangerous.  The  law  inherited  from  hand-tool 
days  is  simply  an  absurdity  in  1907  when  in  the  factories  of 
New  York  State  for  every  accident  caused  by  hand  tools 
there  were  thirteen  caused  by  mechanical  power. 

\\'hat  now  shall  be  the  remedy?  For  it  is  hard  to  be- 
lieve that  public  sentiment,  once  aware  of  the  true  state  of 
the  case  as  outlined  above,  will  tolerate  any  other  question. 
The  answer  is,  simply  fit  .the  law  to  the  fundamental  fact 
of  the  case  that  the  bulk  of  industrial  accidents  are  due  to 
the  workers'  environment  and  not  to  his  fault  in  the  sense 
that  he  is  more  careless  than  those  in  other  walks  of  life. 
Tliis  means  treating  the  injured  workman  as  the  victim, 
not  the  cause,  of  the  accident  and  in  place  of  a  penalty 
giving  him  or  his  family  compensation  for  loss  of  wages 
and  medical  expenses.  Who  shall  pay  this  compensation? 
The  answer  to  this  is,  that  after  all  that  is  possible  has 
been  done  to  prevent  accidents  and  outside  of  wilful  mis- 
conduct of  workmen,  accidents  must  be  regarded  as  prac- 
tically a  necessary  incident  of  the  modern  productive  proc- 
esses by  means  of  which  society  is  able  to  enjoy  the  pres- 
ent degree  of  variety  and  cheapness  in  its  food,  clothing 
and  housing.  The  cost  of  accidents  which  injure  workmen 
should  be  made  a  part  of  the  cost  of  production,  just  as 
the  cost  of  accidents  which  do  damage  to  factories  by  fire 
now  is,  to  be  included  in  the  price  of  goods  paid  by  societ}'. 
It  is  society  for  whose  benefit,  in  the  last  anabasis,  the 
risks  of  modern  mechanical  industry  are  incurred.  There- 
fore it  is  only  just  to  society,  as  well  as  to  the  workman, 
to  thus  transfer  the  burden.  The  practical  method  for 
transferring  the  cost  of  accidents  to  society  at  large,  as 
consumer,  is  simply  to  require  that  in  every  accident  not 
caused  by  wilful  misconduct  of  workers  the  employer  shall 
pay  to  the  injured  workman  or  his  dependents  a  fixed  com- 
pensation based  on  the  economic  loss  of  the  latter,  the 
employer  recouping  himself  by  inclusion  of  such  expense. 
like  any  other  of  the  costs  of  production,  in  the  price  of  the 
market    product,    this    requirement    of    the    individual    em- 


CO.AIPULSORY  INSURANCE  159 

ployer  being  possibly  supplemented,  in  order  to  make  its 
fulfilment  secure  against  his  possible  inability  to  pay,  by 
obligatory  insurance  of  employers  against  their  liability  to 
pay  compensation. 

Such  is  the  alternative  to  which  justice  and  social  ex- 
pediency point  as  the  way  of  escape  from  the  present  in- 
tolerable situation,  a  way  out  which  would  not  only  do 
justice  to  the  85  per  cent  of  injured  workmen  who  have 
no  possible  chance  at  present  of  securing  compensation  at 
law,  which  is  the  main  thing,  but  which  it  could  easily  be 
shown,  did  time  permit,  would  do  better  justice  to  the 
other  15  per  cent  who  now  have  some  legal  chance  foi 
recover}-. 

But  passing  over  such  detailed  comparison  of  work- 
men's compensation  with  emploj^ers'  liabilitj',  the  prime 
question  of  practicability  for  New  York  State  remains  to 
be  briefly  considered.  Fortunately  as  to  the  general  ques- 
tion of  the  practicability  of  compulsory  compensation  for 
all  accidents  under  modern  industrial  conditions,  there  is 
no  necessity  for  discussion.  The  best  test  of  practicability 
is  experience  and  this  test  has  been  applied,  for  years  in 
most  cases,  in  nearly  every  other  modern  industrial  coun- 
try except  the  United  States.  Of  such  European  nations 
only  Switzerland  now  stands  in  the  same  class  with  us. 
Great  Britain,  whence  our  common  law  of  liability  came 
direct  and  whose  industrial  conditions  most  nearly  resemble 
ours,  abandoned  that  old  law  for  the  compensation  system 
in  1897  for  factories,  mines,  railways  and  large  construction 
work,  after  two  j^ears  extended  it  to  agriculture  and  two 
years  ago  further  extended  it  to  mercantile  establishments, 
shipping  and  domestic  service  and  also  extended  it  so  as  to 
cover  certain  trade  diseases  as  well  as  accidents. 

What  then  is  there  to  hinder  the  adoption  by  New  York 
State  of  a  workmen's  compensation  act,  which,  like  the 
English  law,  should  require  employers  to  paj^  every  em- 
ployee injured  by  accident  "not  attributable  to  his  serious 
and  wilful  misconduct"  one-half  wages  during  his  disability 
or  in  case   of  his  death   a   sum  equal  to  three  years'  wages 


i6o  SELECTED  ARTICLES 

to  his  dependents,  with  a  certain  fixed  maximum  in  each 
case,  those  in  the  English  law  being  in  round  numbers,  $5 
for  the  weekly  allowance  and  $1,500  for  fatal  accidents? 
In  the  light  of  European  experience  there  is  only  one  ques- 
tion to  be  raised  here  before  a  negative  answer  is  inescap- 
able, and  that  is:  Could  employers  in  this  state  bear  the 
expense  which  would  be  involved  without  being  unduly 
handicapped  in  competition  with  those  in  neighboring  states 
not  required  to  pay  such  compensation? 

On  this  point  two  things  are  to  be  considered.  In  the 
first  place,  it  is  by  no  means  certain  that  the  cost  of  a  com- 
pensation system  similar  to  that  of  Great  Britain  would  be 
much,  if  an}',  greater  than  the  cost  of  present  legal  liability 
plus  such  voluntary  compensation  as  now  exists.  On  the 
contrary  it  probably  would  not.  This  belief  that  a  compen- 
sation system  would  be  little,  or  no,  more  expensive  to 
employers  in  the  long  run  than  the  present  liability  or 
voluntary  assistance  system,  is  based  principally  on  the 
great  saving  which  would  be  made  in  the  cost  of  litigation 
and  could  be  made  in  the  cost  of  insurance.  A  component 
part  of  compulsory  compensation  systems,  the  success  of 
which  has  been  proven  by  experience  is  the  settlement  by 
arbitration  of  all  disputed  points  between  employer  and  em- 
ployee with  almost  no  expense  to  either.  In  the  matter  of 
cost  of  insurance  there  is  almost  no  comparison  between 
the  commercial  companies  in  this  country  which  sell  liabil- 
ity insurance  and  the  employers'  associations  which  have 
been  established  in  Europe  to  provide  insurance  under  com- 
pensation acts.  Such  associations,  in  Germany,  for  ex- 
ample, in  1904  required  only  13.5  per  cent  of  their  income 
for  administrative  expenses,  paying  the  remainder  to  in- 
jured workmen,  while  in  this  state  in  1905,  of  the  premiums 
paid  b}-  employers  for  liability  insurance  over  68  per  cent 
went  to  the  insurance  companies  for  their  expenses  or 
profits.  With  the  same  economy  of  administration  as  in 
Germany  there  would  have  been  five  times  as  much  to  go 
to  injured  workmen. 

Absolute   proof  that  the  possible   economies  in  the  pres- 


COMPULSORY  INSURANCE  i6i 

ent  system  would  offset  any  additional  expense  which  might 
be  entailed  by  such  a  compensation  scheme  as  that  of 
Great  Britain  is  out  of  the  question,  owing  to  the  inade- 
quacy of  the  existing  statistics.  The  best  statistical  test 
of  the  question  thus  far  made  is  one  recently  undertaken 
by  the  Wisconsin  Bureau  of  Labor  and  Industrial  Statis- 
tics, the  results  of  which  appear  in  Part  I  of  the  Thirteenth 
Biennial  Report  of  that  bureau,  published  as  this  paper  was 
in  preparation.  An  estimate  therein,  based  on  the  expe- 
rience of  over  800  employers,  and  worked  out  carefully  in 
every  detail,  leads  to  the  conclusion  that,  "Assuming  an' 
economical  administration  of  funds,  the  manufacturing  es- 
tablishments reported  in  the  federal  census  of  1905  (for 
Wisconsin)  could  pay  to  every  person  incapacitated  by  an 
injury  in  the  course  of  his  employment  in  these  establish- 
ments, regardless  of  negligence,  the  following  scale  of  pay- 
ments at  a  cost  not  greatly  in  advance  of  what  the  existing 
employers'  liability  premiums  would  amount  to  for  these 
establishments  at  existing  rates:  in  fatal  cases  three  times 
the  annual  wages;  in  non-fatal  cases,  one-half  wages  during 
total  disablement  after  the  second  week  for  one  year,  and 
an  additional  payment  of  $500  or  less  to  those  partly  dis- 
abled for  life  according  to  the  degree  of  such  permanent 
disablement,  and  in  addition  first  medical  aid  in  all  cases." 
This  scale  of  compensation  approximates  very  closely  to 
that  which  was  established  by  the  English  Compensation 
Act  of  1897.  Notice,  too,  that  this  estimate  of  what  could 
be  done  reckons  on  present  cost  of  liability  insurance  alone 
witheut  co-nsidering  what  some  employers  now  voluntarily 
pay  in  addition  in  the  way  of  wages  during  disability,  medi- 
cal expenses  or  lump  sums. 

But  in  the  second  place,  even  allowing  that  compulsory 
compensation  might  impose  a  slight  additional  expense  on 
employers  in  this  state,  it  must  be  borne  in  mind  that  the 
problem  in  that  case  would  only  be  the  same  that  has 
always  had  to  be  faced  in  this  country  with  reference  to 
industrial  reforms.  Regulation  of  industry  being  left  to  the 
individual  states,  while  competition  is  no  respector  of  state 


i62  SELECTED  ARTICLES 

lines,  every  first  step  forward  has  had  to  be  taken  by  some 
one  state  courageous  enough  to  regard  human  life  as  of 
importance  to  society  before  dollars  and  cents.  Child  labor 
has  always  existed  because  it  was  cheap  and  the  first  states 
to  restrict  it  undoubtedly  laid  an  expense  upon  their  em- 
ployers of  which  those  in  other  states  were  free.  But  does 
any  one  now  dare  to  argue  that  those  states  made  a  mis- 
take? On  the  contrary  they  stand  rather  in  honor  as  hav- 
ing been  pioneers  of  progress,  and,  what  is  equally  signifi- 
cant, they  have  drawn  other  states  after  them,  and  it  is 
only  fair  in  a  problem  of  this  kind  to  give  due  regard  to 
this  tendency  of  reform  to  spread  from  one  state  to  another. 
Germany  adopted  compulsory  compensation  for  acci- 
dents eleven  years  before  any  other  country  •  except  Aus- 
tria, and  three  years  before  Austria,  and  she  not  only  was 
not  ruined  by  the  competition  of  her  European  neighbors 
but,  largely  as  the  result  of  her  example,  has  seen  the  sys- 
tem established  generally  throughout  Europe.  The  call  to 
a  similar  role  in  this  country  comes  now  directly  to  the 
individual  states,  for  the  Federal  Government  has  gone 
about  as  far  as  it  can  certainly  go  at  present,  in  view  of  the 
recent  decision  on  the  railway  employers'  liability  act  of 
1906,  by  passing  this  year  a  compensation  act  for  govern- 
ment employees.  To  what  state  can  the  call  be  more  ur- 
gent than  to  the  foremost  manufacturing  state  in  the  Union, 
which  is   New  York  State? 


Survey.  26:  671-6.  August  5,   191 1. 

Workmen's    Coinpensation:       Would    the    best    Sj'steni    for 
general  Welfare  be  Constitutional?     Miles  M.  Dawson. 

This  citation  of  authorities  on  the  constitutionality  of  a 
system  to  provide  for  workmen's  compensation  by  federal 
tax  levied  upon  employers,  according  to  the  hazard  as  a 
percentage  of  the  pay  roll,  to  be  collected  and  disbursed  by 
mutual  associations  of  those  contributing,  rests  upon  the 
proposition    that   it    would    promote    the    general    welfare    of 


COMPULSORY  INSURANCE  163 

the  United  States.  That  being  taken  as  established,  the 
three   questions  are: 

1.  Is  the  purpose  constitutional  and  may  the  funds  be 
disbursed  for  this  purpose? 

2.  Is  the  form  of  the  tax  constitutional? 

3.  Is  the  machinery  for  collecting  and  disbursing  it 
constitutional? 

The  preamble  of  the  federal  constitution  declares  that 
"We,  the  people  of  the  United  States  ordain"  it,  among 
other  purposes,  to  "promote  the  general  welfare."  The 
next  and  the  last  purpose  enumerated  is  to  "secure  the 
blessings  of  liberty  to  ourselves  and  our  posterity."  The 
general  welfare  of  the  entire  United  States  and  all  its 
people,  not  merely  of  the  several  states,  was  in  contempla- 
tion. The  Supreme  Court,  in  McCuUoch  vs.  Maryland,  17 
U.  S.  (4  Wheaton),  316,  pp.  402,  404,  held  that 
its  powers  are  granted  by  them  (i.  e.,  the  people)  and  are  to  be 
exercised  directly  on  them  and  for  their  benefit. 

See  also  Martin  vs.  Hunter's  Lessee,  14  U.  S.  (i  Wheaton), 
304. 

Article  i,  section  8,  of  the  constitution  provides  that 
taxes  may  be  laid  and  collected  "to  pay  the  debts  and  pro- 
vide for  the  common  defense  and  general  welfare  of  the 
United  States."  This  is  the  only  grant  of  power  in  the 
entire  constitution  which  specifies  as  its  object  that  "general 
welfare"  to   "promote"  which  it  was   ordained. 

By  the  great  preponderance  of  authority  the  taxing 
power  is  not  restricted  to  the  purpose  of  executing  the  so- 
called  "enumerated  powers  of  Congress,"  i.  e..  those  vested 
in  that  body  by  the  remaining  paragraphs  of  article  i,  sec- 
tion 8. 

Mr.  Justice  Story  in  his  Commentaries  on  the  Con- 
stitution  says  of  this: 

The  same  opinion  has  been  maintained  at  different  and  distant 
times  by  many  eminent  statesmen.  It  was  avowed  and  apparent- 
ly acquiesced  in,  in  the  stated  (state?)  conventions  called  to  ratify 
the  constitution;  and  it  has  been,  on  various  occasions,  adopted  by 
(:;ong-ress,  and  may  fairly  be  deemed  that  which  the  deliberate  sense 
of  a  majority  of  the  nation  has  at  all  times  supported.  This,  too, 
seems  to  be  the  construction  maintained  by  the  Supreme  Court  of 
the  United  States. 


i64  SELECTED  ARTICLES 

In  this  Jefferson  and   Hamilton,  though  so  widely  apart 

on  principles  of  constitutional  construction,  were  absolutely 

in  harmony,  Jefferson  saying  in  an  official  opinion: 

To  lay  taxes  to  provide  for  the  general  welfare  of  the  United 
States  is  to  lay  taxes  for  the  purpose  of  providing  for  the  general 
welfare.  For  the  laying  of  taxes  is  the  power  and  the  general 
welfare  the  purpose,  for  which  the  power  is  to  be  exercised.  Con- 
gress are  not  to  lay  taxes  ad  libitum,  for  any  purpose  they  please; 
but  only  to  pay  the  debts,  or  provide  for  the  welfare  of  the  Union. 
In  like  manner  they  are  not  to  do  anything  they  please  to  provide 
for  the  general  welfare,  but  only  to  lay  taxes  for  that  purpose. 

and    Hamilton    in    his    report    in    1791,    as    secretary    of    the 
treasury: 

It  is,  therefore,  of  necessity  left  to  the  discretion  of  the  national 
legislature  to  pronounce  upon  the  objects  which  concern  the  general 
welfare,  and  for  which,  under  that  description,  an  appropriation  of 
money  is  requisite  and  proper.  And  there  seems  no  room  for  a 
doubt  that  whatever  concerns  the  general  interests  of  leaining,  of 
agriculture,  of  manufactures,  and  of  commerce,  is  within  the  sphere 
of  the  national  councils,  so  far  as  regards  an  application  of  money. 
The  only  qualification  of  the  generality  of  the  phrase  in  question, 
which  seems  to  be  admissible,  is  this,  that  the  object  to  which  an 
appropriation  of  money  is  to  be  made  must  be  general  and  not 
local,  its  operation  extending  in  fact,  or  by  possibility,  throughout 
the  Union,  and  not  being  confined  to  a  particular  spot.  No  objec- 
tion ought  to  arise  to  this  construction  from  a  supposition  that  it 
would  imply  a  power  to  do  whatever  else  would  appear  to  Con- 
gress conducive  to  the  general  welfare.  A  power  to  appropriate 
money  with  this  latitude,  which  is  granted  in  express  terms,  would 
not  carry  a  power  to  do  any  other  thing  not  authorized  in  the  con- 
stitution, either  expressly  or  by  fair  implication." 

But  one  of  the  elder  statesmen  differed — Madison,  who 
argued  that  appropriations  not  for  the  purposes  of  the 
"enumerated  powers"  are  unconstitutional;  i.  e.,  for  instance, 
that  Congress  has  no  power  to  give  bounties;  but  he  even 
held  (4  Elliott's  Debates,  2nd  Phila.  Ed.,  pp.  525  and  526) 
that  a  protective  tariff  is  constitutional.  Such  a  tariff  the 
Supreme  Court  of  the  United  States  pronounced  in  Downs 
vs.  United  States,  187  U.  S.  496,  at  515.  "like  all  protective 
duties,   a   bounty." 

Mbnroe  held  with  Jeft'crson  and  Hamilton  in  his  mes- 
sage vetoing  the  Cumberland  Road  bill  in  1822,  and  Jackson 
in  his  message  vetoing  the  Maysville  Turnpike   bill  in   1830. 

The  Supreme  Court  of  the  United  States  has  repeatedly 
indicated  its  opinion  that  there  are  no  limitations  of  the 
power  "except  those  expressly  stated"  in  the  constitution. 
See  McCray  vs.  United  States,  195  V.  S.,  27,  at  59;  Flint  vs 


COMPULSORY  INSURANCE  165 

Stone  Tracy  Co.,  220  U.  S.,  107,  at  153;  McCuUoch  vs. 
Maryland,  4  Wheaton,  316,  at  431;  Weston  vs.  City  Council 
of  Charleston,  27  U.  S.  (2  Peters),  449,  at  466,  in  which 
last  Chief  Justice  Marshall  says: 

If  the  right  to  impose  tlie  tax  exi.sts,  it  is  a  riglit  whicli  in  its 
nature  acknowledges  no  limits. 

The  words  "general  welfare"  in  the  constitution  have 
not  been  construed  by  the  Supreme  Court  of  the  United 
States,  except  as  that  court  declared  in  McCulIoch  vs.  Mary- 
land, already  cited,  that  the  powers  of  Congress  are  granted 
by  the  people  and  are  to  be  exercised  on  them  "and  for  their 
benefit.'' 

Hamilton  construed  it  broadly  in  the  following,  taken 
from  the  quotation  already  given: 

And  there  seems  no  room  for  a  doubt  that  whatever  concerns 
the  general  Interests  of  learning,  of  agriculture,  of  manufactures, 
and  of  commerce,  is  within  the  sphere  of  the  national  councils,  so 
far  as  regards  an  application  of  money. 

From  the  outset  Congress  has  put  upon  it  the  construc- 
tion that  it  has  power  to  levy  a  tariff  for  protection;  and  in 
1798  Congress  enacted  a  statute,  in  force  until  1884,  requir- 
ing every  seaman  on  an  American  ship  to  contribute  to  the 
support  of  marine  hospitals.  This  is  the  nearest  un- 
absolute  analogy  to  a  tax  for  the  purpose  here  proposed. 
It  was  never  contested  in  the  courts,  but  represents  the 
continuing  view  of  Congress  as  to  its  powers,  and  has  been 
impliedly  recognized  in  several  decisions  of  the  courts. 

State  courts  have  often  used  the  words  "general  welfare" 
or  words  of  similar  purport  to  support  the  exercise  of  police 
power  and  in  such  connection  as  to  indicate  that  the  wel- 
fare of  the  people  was  intended.  Thus  in  Commonwealth 
vs.  Alger,  7  Cush.  (Mass.),  85, 

the  good  and  welfare  of  the  commonwealth  and  of  the  subjects  of 
the  same: 

in  People  vs.  King,  no  N.  Y.,  418,  "the  peace,  good  order, 
health,  morals,  and  general  welfare  of  the  community";  in 
C.  B.  &  Q.  Ry.  Co.  vs.  Illinois,  200  U.  S.  341, 
the  public  convenience  or  the  general  prosperity,  as  well  as  regu- 
lations designed  to  promote  the  public  health,  the  public  morals, 
or  the  public  safety; 

in  Barbier  vs.  Connolly.  113  U.  S.,  31, 

increase  the  industries  of  the  state,  develop  its  resources,  and  add 

to  its  welfare  and  prosperity; 


i66  SELECTED  ARTICLES 

in  Camfield  vs.  U.  S.,  167  U.  S.,  518, 

the  safeguard  of  the  pubUc  interests. 

These  are  but  a  few  of  the  many  which  might  be  quoted. 

Congress,  then,  may  promote  the  same  "general  wel- 
fare" by  the  exercise  of  its  power  to  tax  which  states  may 
promote  by  the  exercise  of  the  police  power  reserved  to 
them.  The  state  bank-note  and  oleomargarine  decisions 
are  also  conclusive  on  this  point.  The  special  question  re- 
mains, whether,  even  though  for  the  "general  welfare,"  a 
Jaw  providing  such  a  tax  would  not  be  void  as  not  for 
a  "public  purpose." 

There  is  no  provision  in  the  constitution  limiting  taxes 
to  "public  purposes."  If  there  be  such  further  limitation, 
it  must  be  by  implication.  In  Savings  &  Loan  Ass'n.  vs. 
Topeka,  87  U.  S.,  656,  at  664,  the  Supreme  Court  of  the 
United  States  held: 

"We  have  established,  we  thinic,  beyond  cavil,  that  there  can  be 
no  lawful  tay  which  is  not  laid  for  a  public  purpose." 

but  it  was  speaking  of  a  tax  levied  under  a  state  constitu- 
tion containing  no  attthority  for  a  tax  "for  the  general  wel- 
fare." 

The  decision  is  by  some  thought,  however,  to  apply  also 
to  the  federal  power,  because  so  general  in  its  terms  and 
adopting  definitions  of  a  tax  taken  from  Webster's  Diction- 
ary and  from  Cooley  on  Constitutional  Limitations,  both 
including  the  idea  of  a  public  purpose.  The  Supreme  Court 
of  Missouri  in  Deal  vs.  Mississippi  County,  107  Mo.,  464,  14 
L.  R.  A.  622,  declared  a  bounty  for  tree  planting  uncon- 
stitutional under  a  provision  that  taxes  should  be  laid  for  a 
public  purpose  only,  and  said: 

The  principle  announced  by  these  authorities  is  not  founded  on 
or  deduced  from  positive,  affirmative,  constitutional  provisions,  but 
on  and  from  the  limitation  of  the  taxing  power  itself.  Our  con- 
stitution, therefore,  on  this  subject  is  simply  declaratory  of  the 
common  law,  and  of  general  principles  well  recognized  and  almost 
of  universal  application. 

Mr.  Justice  Miller,  himself  a  member  of  the  Supreme 
Court,  indicated  in  his  Lectures  on  the  Constitution  that 
the  power  of  Congress  to  tax  is  more  limited  than  that  of  a 
state,  but  assuredly  not  as  to  the  powers  expressly  granted. 

As    already    shown,    the    Supreme    Court    of    the    United 


COMPULSORY  INSURANCE  167 

States  in  McCray  vs.  United  States,  has  held  to  the  con- 
trary: 

The  taxing  power  conferred  by  the  constitution  l\nows  no  limits 
except  those  expressly  stated  in  that  instrument. 

Do  not  the  very  words,  "for  the  general  welfare,"  in  the 
grant  of  power  in  effect  declare  "the  general  welfare"  to  be 
a  "public  purpose"?  The  Supreme  Court  of  the  United 
States  in  United  States  vs.  R.  R.  Co.,  84  U.  S.  (17  Wall), 
322,  at  326,  has  held: 

a  tax  is  understood  to  be  a  charge  or  pecuniary  buiden  for  the 
support  of  the  government, 

but  since  one  of  the  declared  purposes  in  founding  the 
national  government  was  "to  promote  the  general  welfare," 
the  government  is,  of  course,  to  be  supported  in  doing  this. 
Were  the  restriction  to  a  "public  purpose"  held  to  be 
implied  and  to  limit  the  language  "for  the  general  welfare," 
such  taxation  as  is  here  proposed  is  still  within  the  scope 
of  "public  purposes."  See  Cooley  on  Taxation,  2nd  ed., 
page  124: 

The  support  of  paupers  and  the  giving  of  assistance  to  those  who, 
by  reason  of  age,  infirmity,  or  disability  are  likely  to  become  such 
is,  by  the  practice  and  common  consent  of  civilized  countries,  a 
public  purpose. 

For  a  further  discussion  of  the  subject,  see  the  third 
edition  of  this  valuable  work.  Vol.  i,  pp.  185  and  187. 

It  may  be  objected  that  these  are  insurance  premiums  in 
the  form  of  taxes;  but  that  the  cost  could  be  paid  in  insur- 
ance premiums  does  not  render  it  unconstitutional  to  levy 
a  tax  for  "the  purpose  if  "for  the  general  welfare."  Nioble 
State  Bank  vs.  Haskell,  219  U.  S.,  104,  at  no  and  iii  and 
575.  580;  also  the  concurring  opinion  of  Cullen,  C.  J.,  in 
Ives  vs.  South  Buffalo  Ry.  Co.,  201  N.  Y.,  271,  at  320.  The 
obiter  dictum  in  the  opinion  of  the  court  in  the  last-men- 
tioned at  page  296,  that  a  special  tax  upon  a  particular 
industry 

for  the  support  of  hospitals  and  other  charitable  institutions  upon 
the  theory  that  they  are  devoted  largely  to  the  alleviation  of  ilLs 
primarily  due  to  his  business 

would  not  be  constitutional,  does  not  afifect  this,  as  that 
issue  was  not  before  the  court.  The  contrary  was  held  in 
State    vs.    Cassidy.    22    Minn.,    312,    sustaining    a    tax    upon 


i68  SELECTED  ARTICLES 

saloon-keepers    to    support    an    asylum    for    inebriates.     See 

also   Charlotte   Ry.   Co.  vs.   Gibbes,  27  S.   C,  385,  142  U.  S., 

386;  Consol.  Coal  Co.  vs.  Illinois,  185  U.  S.,  207;  People  vs. 

Squire,  145  U.  S.,  175;  Trustees  Exempt  Firemen's  Fund  vs. 

Roome,  93  N.  Y.,  313,  in  which,  of  the  support  of  volunteer 

firemen    disabled   by   accident,    disease,     or    age,     and     their 

families,  it  w^as  said, 

it  aimed  to  accomplish  a  Jjublic  purpose; 

and  also   Matter  of  Shattuck,   193   N.  Y.,  446,  setting  forth 

the   quite   universal  rule   that   charitable  uses   and   public   iises  are 

synonymous. 

The  highest  courts  of  Michigan,  Ohio,  and  Kentucky 
have  upheld  laws  levying  a  tax  upon  dogs  to  remunerate 
owners  of  sheep  destroyed  by  dogs,  as  a  legitimate  exer- 
cise of  the  police  power.  In  the  first  of  these  cases,  Van 
Horn  vs.  People,  46  Mich.  183,  41  Am.  Rep.  159,  9  N.  W., 
246,  the  Supreme  Court  of  Michigan  also  said: 

As  the  charge  laid  upon  the  owners  of  dogs  is  a  pecuniary 
burden  imposed  by  public  authority,  it  partakes  no  doubt  of  the 
character  of  a  tax  and  for  many  purposes  might  be  so  spoken  of 
without  harm. 

This  decision  was  followed  in  a  line  of  cases  collected 
in  a  note,  17  L.  R.  A.  (N.  S.)  885.  The  Court  of  Appeals 
of  Kentucky  sustained  a  similar  tax  upon  the  same  ground, 
but  also  under  the  power  to  levy  taxes,  though  the  state 
constitution  strictly  restricts  taxes  to  public  purposes.  The 
court   said: 

If  the  whole  state  may  be  taxed  for  the  purpose  of  maintaining 
a  state  fair  to  exhibit  the  various  agricultural  pursuits,  we  are 
unable  to  see  why  it  may  not  be  taxed  to  prevent  the  destruction 
of  sheep  by  dogs. 

This  court  fully  recognized  the  insurance  character  of 
this  tax,  saying  that  it  required  that 

the  owners  of  them  shall  pay  a  tax,  the  proceeds  of  which  wilt 
insure  sheep  raisers  against  the  effect  of  their  ravages. 

The  argument  of  the  court  was  that  it  was  certainly  rea- 
sonable 

if  protection  is  to  be  had  at  all,  that  each  owner  of  a  dog  should 
be  required  to  contribute  a  small  amount  to  a  common  fund  dedi- 
cated to  the  remuneration  of  owners  of  sheep  killed  by  unknown 
dogs. 

'basing  its  opinion  also  in  part  upon  the  impossibility  of 
ascertaining  "the  owner  of  the  dog  committing  the  ravage." 


COMPULSORY  INSURANCE  169 

In  a  dissenting  opinion  in  that  case,  it  was  argued  that 
it   is  not 

a  valid  exercise  of  the  police  power 
to  make 

all  of  one  class  of  property  holders  pay  the  losses  incurred  in  a 
private  business  by  another  class  because  this  loss  has  been  occa- 
sioned by  the  property  of  some  of  the  first  class. 

This  precise  contention  was  advanced  by  counsel  in  Noble 
State  Bank  vs.  Haskell.  219  U.  S.,  104,  which  decision  at 
pages  no  and  in  disposes  of  it  fully  and  finally,  holding: 
Nevertheless,  notwith.standing  the  logical  form  of  the  objection, 
there  are  more  powerful  considerations  on  the  other  side.  In  the 
first  place  it  is  established  by  a  series  of  cases  that  an  ulterior 
public  advantage  may  justify  a  comparatively  insignificant  taking 
of  private  property  for  what,  in  its  immediate  purpose,  is  a  pri- 
vate use. 

In  denying  a  rehearing,  219  U.  S.  575,  the  court  says  that 
the  decisions  referred  to  by  it 

were  cited  to  establish  not  that  property  might  be  taken  for  a 
private  use,  but  that,  among  the  public  uses  for  which  it  might  be 
taken,  were  some  which,  if  looked  at  only  in  their  immediate 
aspect,  according  to  the  proximate  effect  of  the  taking,  might  seem 
to  be  private. 

It  may  be  argued  that,  since  these  were  sustained  under 
the  police  power,  all  being  as  to  the  constitutionality  of 
certain  state  laws,  they  would  not  apply  to  the  proposed 
exercise  of  the  taxing  power. 

The  accomplishment  of  police  power  regulations  by 
means  of  taxation  was  involved  in  Edye  vs.  Robertson,  112 
U.  S..  580,  upholding  a  tax  of  50  cents  per  passenger  on 
ship-owners,  and  the  question  of  the  right  so  to  employ  it, 
even  when  Congress  could  not  have  acted  under  the  police 
power  directly,  was  set  at  rest  in  the  decisions  on  the  state 
bank-note  tax  and  the  oleomargarine  tax. 

Mr.  Justice  Story,  in  his  Commentaries  on  the  Constitu- 
tion says  that 

the  power  to  lay  taxes  is  not  by  the  con.stitulion  confined  to  pur- 
poses of  revenue.  In  point  of  fact  it  has  never  been  limited  to 
such  purposes  by  Congress;  and  all  the  great  functionaries  of  the 
government  have  constantly  maintained  the  doctrine  that  it  was 
not  constitutionally  so  limited. 

Regarding  the  power  to  appropriate  the  taxes  to  the 
purposes  for  which  collected,  as  stated,  Madison  was  of  the 
opinion    that    Congress   had    no   power   to    give    bounties.     A 


I/O  SELECTED  ARTICLES 

similar  opinion  has  been  expressed  by  the  Court  of  Appeals 
of  the  District  of  Columbia  in  United  States,  ex  rel.  Miles 
Planting  &  Mfg.  Co.  vs.  Carlisle,  5  App.  Cas.  (D.  C.)  138, 
holding  the  sugar  bounty  invalid  on  the  ground  that  the 
appropriation  was  '"for  a  private  purpose."  This  was  based 
in  part  upon  inferences  from  Mr.  Justice  Miller's  Lectures 
on  the  Constitution. 

The  Supreme  Court  of  the  United  States,  however,  has 
had  this  question  twice  before  it,  in  Field  vs.  Clark,  143  U. 
S.,  649,  and  United  States  vs.  Realty  Co.,  163  U.  S.,  433,  both 
of  which  were  decided  on  other  grounds  without  indicating 
that  it  deemed  the  bounties  unconstitutional,  as  it  might  have 
done. 

In  Willoughby  on  the  Constitution,  page  588,  the  opinion 
is  expressed  that 

the  doctrine  has  become  an  established  one  that  Congress  may- 
appropriate  money  in  aid  of  matters  which  the  Federal  Govern- 
ment is  not  constitutionally  able  to  administer  and  regulate, 

relying  upon  decisions  already  cited  and  the  views  of  Presi- 
dent Monroe  and  President  Jackson  already  referred  to. 

Bounties  have  been  voted  and  paid  by  the  government 
from  the  earliest  daj^s.  Senator  Daniel,  21  Congressional 
Record,  part  3,  2295,  cited  in  1890  about  forty  instances, 
thirty-three  being  for  the  relief  of  sufiferers  by  fire,  earth- 
quake, Indian  depredations,  overflow  of  the  Mississippi  and 
Ohio  rivers,  cyclones,  yellow  fever,  grasshoppers,  lack  of 
seed  by  failure  of  crops,  or  from  accidents  at  arsenals. 

Mr.  Justice  Story  in  his  work  on  the  Constitution  aft£r 
an  exhaustive  review  of  authorities  concludes  as  to  the  power 
of  Congress,  having  collected  taxes  "for  the  general  wel- 
fare", to  appropriate  the  same  for  any  purpose  that  is  plainly 
such,  as  follows: 

The  controversy  is  virtually  at  an  end  if  it  is  once  admitted 
that  the  words  "to  provide  for  the  common  defense  and  general 
welfare"  are  a  part  and  qualification  of  the  power  to  lay  taxes; 
for  then  Congress  has  certainly  a  right  to  appropriate  money  to 
any  purposes,  or  in  any  manner,  conducive  to  those  ends. 

See  also  the  opinions  of  Jefferson  and  Hamilton  alreadj- 
quoted.     Also   the   reasoning   of   the    Supreme    Court    of   the 


COMPULSORY  INSURANCE  171 

United  States  in  United  States  vs.  Realty  Co.,  163  U.  S.  427 
at  440: 

Having  power  to  raise  money  for  that  purpose  it  of  course  follows 
that  it  has  power  when  the  money  is  raised  to  appropriate  it  to 
the  same  object. 

It  must  also  be  considered  whether  the  form  of  the  tax 
is  constitutional.  Cooley  on  Constitutional  Limitations  de- 
fines a  tax  "upon  licenses  to  pursue  certain  occupations"  as 
an  excise,  which  definition  was  adopted  by  the  Supreme 
Court  of  the  United  States  in  Flint  vs.  Stone  Tracy  Co., 
220  U.  S.,  207,  following  Thomas  vs.  United  States,  192  U. 
S.,  363- 

Such  a  tax  would  not  be  void  as  not  "uniform  throughout 
the  United  States."  It  would  be  uniform  upon  employers 
everywhere,  the  hazard  being  the  same.  The  provision  of 
Art.  I,  Sec.  8,  requiring  indirect  taxes  to  be  "uniform  through- 
out the  United  States,"  has  been  held  by  the  Supreme  Court 
of  the  United  States  in  Knowlton  vs.  Moore,  178  U.  S.,  41, 
at  106,  to  signify  not 
an  intrinsic  but  simply  a  geographical  uniformity. 

See  also  Head  Money  Cases,  Edye  vs.  Robertson,  and 
Flint  vs.  Stone  Tracy  Co.,  already  cited. 

It  would  also  be  constitutional  to  make  a  general  appro- 
priation of  all  the  proceeds  of  these  taxes  in  the  original 
law  itself.     See  Edye  vs.  Robertson,  112  U.  S.  580,  at  599. 

The  sole  remaining  question  is  as  to  the  power  of  Con- 
gress to  set  up  mutual  associations  for  the  purpose  of  col- 
lecting and  disbursing  these  taxes.  Congress  may  set  up 
such  governmental  agencies  as  it  deems  wise  and  proper 
for  these  purposes,  as,  for  instance,  it  did  when  it  levied  the 
tax  upon  seamen  for  the  support  of  marine  hospitals. 

This  has  repeatedly  been  held  in  the  state  courts,  as  in 
Hager  vs.  Kentucky  Children's  Home  Society,  67  L.  R.  A., 
815;  by  the  Court  of  Appeals  of  Kentucky,  in  State,  ex  rel. 
St.  Louis  vs.  Seibert,  123  Mo.  424;  Shepherd's  Fold  of 
Protestant  Church  vs.  New  York,  96  N.  Y.  137;  Trustees 
Exempt  Firemen's  Benevolent  Fund  vs.  Rome,  93  N.  Y.  313; 
People  vs.  Brookb'n  Cooperage  Co.,  187  N.  Y.,  142;  Board 
of  Underwriters  vs.   Whipple,  2  App.   Div.   (N.   Y.)   361. 


172  SELECTED  ARTICLES 

Associations  so  set  up  are  called  in  the  New  York  deci- 
sions "subordinate  governmental  agencies"  and  the  only 
limitation  upon  the  character  of  such  agencies  is  set  forth 
in  Fox  vs.  Mohawk  &  Hudson  River  Humane  Soc,  165  N. 
Y.,  517,  at  528,  holding  that  an  association  whose  member- 
ship '"may  be  accorded  or  withheld  at  its  pleasure,  and  the 
management  of  the  corporation  and  the  selection  of  its  of- 
ficers is  wholly  vested  in  the  corporators"  would  not  be  a 
proper  "subordinate  governmental  agency."  Obviously  this 
would  have  no  application  to  such  associations  as  are  here 
proposed;  thej-  would  be  entirely  under  the  control  of  Con- 
gress. 

In  the  famous  decision  of  McCulloch  vs.  Maryland,  al- 
ready cited,  Chief  Justice  Marshall,  upholding  the  establish- 
ment of  the  United  States  Bank,  said: 

A  bank  is  a  proper  and  suitable  instrument  to  assist  the  opera- 
tions of  tlie  government  in  the  collection  and  disbursement  of  the 
revenue;  in  the  occasional  anticipations  of  taxes  ad  imposts;  and 
in  the  regulation  of  the  actual  currency,  as  being  a  part  of  the 
trade  and  exchange  between  the  states.  It  is  not  for  this  court  to 
decide  whether  a  bank,  or  such  a  bank  as  this,  be  the  best  pos- 
sible means  to  aid  these  purposes  of  government.  Such  topics 
must  be  left  to  that  discussion  which  belongs  to  them  in  the  two 
houses  of  Congress.  Here,  the  only  question  is,  whether  a  bank, 
in  its  known  and  ordinary  operations,  is  capable  of  being  so  con- 
nected with  the  finances  and  revenues  of  the  goveinment  as  to  be 
fairly  within  the  discretion  of  Congress  when  selecting  means  and 
instruments  to  execute  its  powers  and  perforin  its  duties.  *  *  * 
Congress  has  duties  to  perform  and  powers  to  execute.  It  has  a 
right  to  the  means  by  which  these  duties  can  be  properly  and  most 
usefully  performed  and  these  powers  executed.  Among  other  means, 
it  has  established  a  bank,  and  before  the  act  establishing  it  can 
he  pronounced  unconstitutional  and  void,  it  inust  be  shown  that  a 
bank  has  no  fair  connection  with  the  execution  of  any  power  or 
duty  of  the  national  government,  and  that  its  creation  is  conse- 
quently a  manifest  usurpation. 

The  associations  here  proposed  being  solely  for  the  exe- 
cution of  the  power  to  lay  and  collect  taxes  for  the  general 
welfare  and  to  disburse  the  avails  thereof  for  that  purpose, 
this  expression  of  the  highest  court  of  the  United  States 
appears  to  be  determining  as  to  their  constitutionality. 


COMPULSORY  INSURANCE  173 

Survey.   27:   1015-6.   October  21,   1911. 

Washington's  "Yes"   to   New  York's  "No." 

The  Supreme  Court  of  a  second  state  of  the  union  has 
declared  itself  on  the  constitutionality  of  workmen's  com- 
pensation. This  decision  was  given  by  the  highest  bench  of 
Washington  on  September  27,  and  is  favorable.  It  is  the 
result  of  a  test  case  brought  by  a  supply  house  against  the 
state  auditor  to  secure  payment  for  a  table  furnished  the 
Industrial  Insurance  Department.  Judge  Fullerton,  who 
writes  the  opinion,  states  that  in  spite  of  their  dissimilarity 
in  form  the  principles  embodied  in  the  New  York  and  the 
Washington  acts  are  similar.  He  offers  no  direct  criticism 
of  the  adverse  decision  rendered  by  the  New  York  court  last 
winter,  but  says  that 

notwithstanding  the  decision  comes  from  the  liighest  court  of  the 
fiist  state  of  the  union  and  is  supported  by  a  most  persuasive 
argument,  we  liave  not  been  able  to  yield  our  consent  to  the  views 
there  taken. 

The  four  grounds  on  which  the  constitutionality  of  the 
act  was  challenged  were  that  it  violates  the  constitutional 
provisions  that  no  person  shall  be  deprived  of  life,  liberty, 
or  property  without  due  process  of  law;  that  no  law  shall 
be  passed  granting  to  any  individual  or  class  rights  not  be- 
longing to  all;  that  no  individual  shall  be  deprived  of  the 
right  of  jury  trial  and  that  all  taxation  shall  be  equal  and 
uniform  and  based  upon  the  money  value  of  property. 
With  the  exception  of  this  last  objection,  the  arguments 
brought  in  the  Washington  case  would  apply  to  compulsory 
compensation  equally  with  compulsory  insurance.  The  first 
of  these  four  considerations  was,  it  will  be  remembered,  the 
basis  of  the  decision  against  the  New  York  law.  To  offset 
the  decision  of  the  New  York  court  the  Washington  court 
finds  and  quotes  from 

many  statutes  held  constitutional  by  the  courts  where  liability  is 
created  without  fault  and  where  the  property  of  one  person  is 
taken  to  pay  the  obligations  of  another,  with  no  compensation  to 
the  person  whose  property  is  thus  taken. 

Among  these  may  be  cited  the  Oklahoma  Banking  Law 
(Noble  State  Bank  vs.  Haskell)   and  the  tax  against  owners 


174  SELECTED  ARTICLES 

of  saloons  to  recompense  for  losses  of  property  due  ito 
intoxication  (Delfel  vs.  Hanson,  2  Wash.  194).  The  justifi- 
cation for  such  legislation  Judge  Fullerton  finds  in  the  police 
power,  which  he  defines  as  the  "power  to  govern,"  and  he  be- 
lieves that  the  clause  of  the  constitution  quoted  against  the 
law  cannot  hold  good  against  any  regulation  by  this  govern- 
ing power  which  is  reasonable  and  not  arbitrary  or  capri- 
cious. The  statute  in  question  has  to  his  mind  this  attribute 
of  reasonableness — a  reasonableness,  it  will  be  remembered, 
acknowledged  by  the  New  York  court  to  be  grounded  on 
sound  economic  and  moral  principles — and  should,  he  holds, 
therefore  stand. 

The  police  power  also,  the  court  holds,  covers  the  second 
objection  that  the  statute  embodies  class  legislation.  The 
limitations  imposed  on  this  power,  says  Judge  Fullerton's 
opinion,  allow  of  a  wide  discretion  in  this  respect,  one  of  its 
distinctive  functions  being  to  protect  the  community  at 
large  from  certain  businesses,  for  instance  that  of  the  rag- 
man, or  to  protect  the  workers  in  a  business  from  the  dan- 
gers inherent  therein,  by  such  regulations  as  the  fixing  of 
hours  and  the  prescribing  of  safety  regulations.  Going 
furtlier.  he  holds  that  the  assigning  of  the  funds  collected 
for  a  definite  class  of  workmen  is  entirely  in  conformity 
with  many  state  and  federal  precedents  held  constitutional 
by  the  courts,  such  as  the  federal  law  that  shipowners  must 
contribute  to  a  fund  for  a  hospital  for  seamen,  or  the  Ken- 
tucky laws  establishing  a  license  fund  for  dogs,  to  be  used 
to  compensate  sheep  owners  for  the  loss  of  their  sheep. 

With  the  same  argument  of  the  police  power  the  third 
contention  is  met,  the  court  holding  that  the  employe  may 
be  obligated  to  accept  the  conditions  of  the  statute  even 
when  they  involve  the  withdrawal  of  the  right  of  jury  trial. 
Judge  Fullerton  acknowledges  that  there  is  no  direct  judi- 
cial authority  for  this  contention  but  holds  that  as  the  state 
may  make  it  a  condition  of  employment  that  a  man  may  not 
be  allowed  to  vi^ork  more  than  ten  hours  a  day,  so  it  may 
force  the  acceptance  of  a  fixed  indemnity  for  accident  as  a 
condition  of  employment  in  a  certain  industry. 


COMPULSORY  INSURANCE  175 

The  final  objection,  that  the  insurance  premium  provided 
for  by  the  Washington  law  is  a  tax  and  violates  the  con- 
stitutional provision  that  taxation  shall  be  equal  and  uniform, 
the  court  meets  by  the  argument  that  the  imposition  is  not 
a  tax  in  the  ordinary  sense  of  the  word  as  no  accession  to 
the  public  revenue  is  authorized  or  aimed  at.  The  fund  is  to 
be  used  not  to  meet  the  current  expenses  of  government  but 
to  recompense  employes  for  injuries  sustained  at  work.  It 
is  in  reality,  the  court  holds,  not  a  tax  but  a  license  fee,  and 
the  decision  cites  many  federal  and  state  decisions  on  analo- 
gous license  laws  to  sustain  its  holding  that  such  a  fee  is 
not  inimical  to  either  state  or  federal  constitutions. 

The  Washington  decision  is  unanimous,  though  Judge 
Chadwick  in  his  concurring  opinion  feels  that  question  of 
the  right  of  jury  trial  should  not  have  been  decided  in  the 
abstract,  but  left  to  such  time  as  some  employer  aggrieved 
at  the  operation  of  the  law  or  some  injured  workman  de- 
prived of  his  right  of  jury  trial  brings  a  case  which  could 
pass  for  final  hearing,  on  the  federal  questions  involved,  to 
the  Supreme  Court  of  the  United  States.  With  the  conclu-- 
sions  of  the  court  on  the  other  three  propositions  Justice 
Chadwick  agrees. 


Survey.  28:  243-4.  May  4,  1912. 

Reasons    for   Trying    Workmen's    Compensation. 
Adelbert  Moot. 

There  are  many  strong  reasons  for  trying  workmen's 
compensation,  rather  than  compulsory  insurance,  as  a  legal 
measure  of  the  damages  caused  by  industrial  accidents.  A 
few  may  be  thus  stated: 

Germany  has  tried  compulsory  insurance  for  more  than 
thirty  years,  under  more  favorable  conditions  than  we  can 
hope  for  in  this  country,  and  yet  the  most  earnest  discussion 
is  now  going  on  in  that  country  over  its  success  or  com- 
parative  failure.     That  compulsory   insurance   is   a   great  im- 


176  SELECTED  ARTICLES 

provement  upon  our  own  antiquated  negligence  common 
law  is  not  to  be  denied.  But  after  several  years'  trial,  in 
1888  its  financial  burdens  were  78,241,023  marks,  while  in 
1899,  or  only  eleven  years  later,  those  financial  burdens  had 
doubled,  and  doubled,  and  doubled  again;  in  other  words, 
had  grown  to  767,428,904  marks.  Nor  did  even  this  amount 
produce  peace  and  contentment  among  the  beneficiaries,  for 
in  1909,  out  of  422,076  awards,  there  grew  76,352  appeals. 
So,  too,  in  1898  there  were  only  4,563  appeals  for  causes 
that  gave  rise  to  37,422  appeals  in  1910.  This  increase  in 
appeals  is  partly  explained  as  due  to  substituting  lump  sum 
awards  for  continuing  pensions.  Another  partial  explana- 
tion is  that  pensions  were  "too  liberally  granted,"  but  if 
such  was  the  case  in  stringent  Germany,  what  would  happen 
in  this  country  in  cases  where  the  victim  could  bring  a  "pull" 
to  bear  in  favor  of  his  demand  for  a  pension? 

In  Ohio  we  are  told  that  premiums,  as  fixed  by  the  state 
officials,  have  a  wide  range.  That  range  gives  those  manu- 
facturers having  a  "pull"  a  great  chance  with  political  of- 
ficials. That  range  is,  for  example,  from  35  cents  to  $15  per 
Sioo  in  wages  in  textile  manufactures;  from  95  cents  to  $21.20 
in  metals;  and  from  $2.20  to  $29.80  in  ore  and  coal  handling. 

With  a  board  made  up  of  political  appointees,  such  as 
some  governors  of  some  states  are  sure  to  appoint,  without 
experience  in  either  business  or  insurance,  and  such  a  wide 
range  of  premiums,  what  is  to  become  of  business?  Where 
will  the  little  business  concern,  without  experience  or  in- 
fluence, come  out.  in  competition  with  a  big  and  influential 
competitor?  Will  not  the  shop  of  the  big  concern  be  found 
safe  and  get  a  low  premium,  where  the  little  one  will  be 
found  unsafe,  whether  really  so  or  not,  and  so  get  a  maxi- 
mum premium?  And  if  not,  is  it  not  clear  that  risky  busi- 
ness must  leave  the  state,  because  it  cannot  pay  any  such 
maximum  premiums  and  live?  Life  and  limb  are  more  than 
business,  but  if  the  workman  cannot  get  work  and  must 
see  his  family  starve,  is  he  better  ofif  than  he  would  be  to 
have  work  to  support  them,  at  some  risk  of  life  and  limb? 
In  Germany  it  is  said  the  expense  ranges  from  i  to  4.5  per 


COMPULSORY  MXSURANCE  177 

cent  of  the  cost  of  production;  but  we  cannot  see  how  the 
Ohio  premiums  in  risky  business  could  produce  any  such 
results.  Those  premiums  seem  to  be  prohibitive  in  risky 
business.  The  truth  is  that  in  Germany,  with  politics  ex- 
cluded, and  experts  included,  there  has  been  prosperity  un- 
der compulsory  insurance,  just  as  there  has  been  prosperity 
in  England  under  workmen's  compensation.  That  compul- 
sory insurance  is  not  so  well  adapted  to  free  government, 
is  seen,  however,  from  the  struggles  of  France  with  com- 
pulsory insurance;  for  as  to  France  it  is  explained  that  the 
trouble  is  due  to  her  "too  liberal  tribunals."  That  "maling- 
ering," and  "wholesale  dissimulation,"  have  compelled  Ger- 
many to  recently  amend  her  law  to  cut  out  "minor  acci- 
dents," and  avoid  so  many  "battles  for  pensions"  by  a  "clean 
up"  with  lump  sum  awards,  shows  that  all  is  not  as  bright 
as  painted;  also  a  tendency  towards  the  principle  of  work- 
men's compensation,  not  compulsory  insurance,  even  in  Ger- 
many. 

The  attempts  of  Ohio.  Washington,  and  Massachusetts, 
to  adapt  the  compulsory  insurance  system  of  Germany  to 
this  country,  seem  unsatisfactorj^  We  want  to  keep  away 
from  bureaus,  centralized  government,  politics,  and  political 
pulls,  and,  therefore,  despite  the  fact  that  no  workmen's 
compensation  act  is  perfect,  we  will  do  better  to  follow  Eng- 
land and  our  own  states  with  workmen's  compensation  acts. 
The  proposed  federal  workmen's  compensation  act,  if  made 
applicable  to  all  interstate  industries  employing  many  per- 
sons, would  be  a  suggestive  model  for  such  an  act  for  the 
states,' as  to  intrastate  industries. 

Survey.  28:  239-40.  May  4,  1912. 

Workmen's  Compensation   for  the  United  States. 

Henry  R.  Seager. 

For  the  United  States,  the  system  of  compensation,  as 
distinguished  from  the  system  of  employers'  liability,  is 
still   novel,  and   any  plan   that   may  be   introduced   must   be 


178  SELECTED  ARTICLES 

viewed  as  an  experiment.  For  this  reason  I  am  inclined  to 
believe  that  at  the  outset  a  system  of  simple  compensation 
without  any  insurance  requirement  will  be  found  to  be  best 
suited  to  American  conditions  in  our  eastern  states.  A 
system  of  compulsory  insurance  through  employers'  asso- 
ciations could  not  be  made  effective  under  state  law  as  re- 
gards many  industries,  because  often  the  employers  who 
should  be  included  are  not  found  within  the  borders  of  a 
single  state.  Again,  American  employers  have  made  such 
unequal  progress  in  their  efforts  to  cope  with  the  problem 
of  preventing  accidents,  and  in  their  policies  with  reference 
to  compensating  accidents,  that  to  force  them  to  join  to- 
gether in  associations  would  be  viewed  by  employers  them- 
selves as  unfair.  The  efficiency  of  the  German  accident 
insurance  associations  has  been  due  to  the  fact  that  they 
embrace  all  employers  in  the  same  industry  within  the 
German  Empire,  and  that  the  requirement  that  German  em- 
ployers belong  to  such  associations  is  along  the  line  of  simi- 
lar requirements  which  the  German  government  imposes  on 
employers  in  other  connections;  it  harmonizes  with  the 
temper  and  habits  of  German  business  men.  Exactly  the 
same  plan  would,  in  my  judgment,  be  quite  out  of  harmony 
with  the  temper  and  habits  of  American  business  men.  The 
same  considerations  apply  even  more  strongly  to  compul- 
sory state  insurance. 

One  of  the  most  serious  accidents  that  has  happened  in 
the  state  of  Washington  since  the  insurance  system  came 
into  operation  was  the  blowing  up  of  a  small  powder  mill 
controlled  by  an  independent  company.  Under  the  Wash- 
ington system,  all  powder  mills  in  the  state  must  contribute 
pro  rata  to  the  compensation  of  the  victims  of  this  accident. 
The  owners  of  other  powder  mills  contend  that  with  the 
greater  care  which  they  devote  to  the  problem  of  accident 
prevention  such  a  disaster  could  not  have  happened  in  their 
mills,  and  on  this  ground  they  are  contesting  the  validity  of 
the  Washington  law  as  taking  their  property  without  due 
process  of  law.  Notwithstanding  that  the  law  has  been 
sustained   by  the   Supreme    Court   of  Washington,   it   is   still 


COMPULSORY  IXSURAXXE  179 

possible  that  on  this  state  of  facts  the  United  States  Su- 
preme Court  maj'  declare  the  Washington  act  invalid. 

As  this  illustration  brings  out,  the  weakness  of  state 
insurance,  as  usually  administered,  is  that  it  fails  to  give  the 
careful  employer  the  benefit  of  the  reduced  ratio  of  acci- 
dents in  his  own  plant  that  results  from  his  care.  Along 
with  careless  employers  in  the  same  industry,  he  is  required 
to  contribute  to  a  common  fund,  out  of  which  compensation 
lo  all  those  injured  in  the  industry  is  paid,  in  proportion  to 
his  pay-roll.  Such  a  policy  discourages  efforts  at  accident 
prevention  on  the  part  of  the  individual  employer,  and  is 
highly  unfortunate  because,  after  all,  the  surest  means  of 
reducing  accidents  is  the  incentive  which  the  compensation 
system  gives  the  individual  employer  to  do  everything  in  his 
power  in  this  direction.  It  may  of  course  be  urged  that 
this  is  not  a  necessary  condition  of  a  state  insurance  sys- 
tem. As  the  German  insurance  associations  vary  the  rate 
according  to  the  accident  record  of  each  individual  em- 
ployer, rewarding  the  careful  employer  with  a  lower  rate 
and  penalizing  the  careless  employer  by  a  higher  rate,  so  it 
may  be  said  a  state  insurance  department  may  vary  its  rates. 
The  difficulty  here  is  that  the  mere  suggestion  that  rates 
may  be  shaded  for  the  benefit  of  individual  employers  at 
the  discretion  of  the  state  insurance  department  would  in 
any  American  community,  give  rise  to  charges  of  favoritism 
and  suspicions  of  graft  that  would  go  far  to  neutralize  any 
benefits  that  might  result  from  variable  rates. 

These  disadvantages  connected  with  compulsory  insur- 
ance may  and  doubtless  will  in  time  be  overcome.  My  con- 
tention is  that  because  of  them  the  first  step  in  the  develop- 
ment of  a  wise  compensation  system  for  the  United  States 
should  be  simple  compensation  like  that  proposed  in  the  bill 
now  before  Congress.  As  a  result  of  experience  of  a  simple 
compensation  system  supplemented  by  optional  insurance, 
public  opinion  will.  I  believe,  be  educated  to  demand  the 
next  step,  that  is.  certain  provision  through  compulsory  in- 
surance or  otherwise  for  the  victims  of  accidents  of  employ- 
ers  who   may   become   insolvent.     I   am    quite   willing   to   go 


i8o  SELECTED  ARTICLES 

further  and  assert  that,  in  the  end,  a  system  of  state  con- 
trolled insurance  will  probably  prove  on  the  whole  best.  I 
should,  however,  look  with  a  good  deal  of  misgiving  on  the 
introduction  of  a  system  of  compulsory  state  insurance  in 
our  own  state  of  New  York  under  present  political  condi- 
tions. 

Survey.  28:  247-8.  May  4,  1912. 

Dr.   Fricdensburg's  Arraignment  of  the   German   Working- 
men's    Insurance    System.      Henry    L.    Slobodin. 

'Ts  that  all?"  one  asks  after  perusing  Dr.  Fricdensburg's 
arraignment  of  the  German  workingmen's  insurance  system. 
Even  this  severest  critic  did  not  dare  to  condemn  the  Ger- 
man plan  as  a  whole;  nor  directly,  or  bj'  inference,  express 
a  preference  for  the  English  or  any  other  plan.  It  is  obvious 
that  even  in  Dr.  Fricdensburg's  mind  the  question  is  no  more 
debatable.  The  German  system  is  beyond  comparison  and 
has   come   to   stay. 

Dr.  Fricdensburg's  strictures  cannot  be  viewed  as  serious 
criticism.  They  produce  in  one  the  impression  of  petulant 
fault-finding.  Why  do  workingmen  try  to  get  more  than 
they  are  legally  entitled  to?  Why  is  the  insurance  office 
administered  in  the  spirit  of  benevolence  rather  than  law? 
Why  do  the  workingmen  continue  to  be  ungrateful  and  dis- 
contented? Why  has  insurance  failed  to  eradicate  socialism? 
Why  do  the  sanitaria,  some  of  which  are  actually  under  the 
control  of  the  socialists,  treat  the  workingmen  with  unheard- 
of  humanity? 

The  socialists,  far  from  denying  all  this,  are  shamelessl}^ 
rejoicing  that  this  is  so.  They  are  grateful  to  Dr.  Friedens- 
burg  for  confirming  their  own  views  as  to  how  state  insur- 
ance will  pan  out.  The  German  system  meets  the  biggest 
argument  against  state  ownership,  namely,  that  state  de- 
pendents will  be  subservient  tools  of  the  government  or  poli- 
ticians. Dr.  Friedensl)urg  learned  that  the  comfort  offered 
to  the  workingmen   in   a   sanitarium   arouses  their  discontent 


COMPULSORY  INSURANCE  i8i 

with  tile  conditions  outside.  Nothing  better  could  be  said 
in  favor  of  those  institutions.  Let  the  workingmen  open 
their  eyes  and  see  that  there  are  plenty  of  good  things  in  this 
world  which  all  of  them  could  enjoy  under  a  rational  eco- 
nomic  system. 

Why!  exclaims  Dr.  Friedensburg  in  horror.  You  will 
make  a  nation  of  shirkers! 

Tut,  tut,  dear  doctor.  The  workingmen  will  do  their 
share  of  the  nation's  work,  if  only  you  and  j^ours  will  do 
your  share.  However,  the  socialists  admit  that  shirking 
work  is  bad  and  anti-social.  But  what  can  you  expect  in  a 
system  where  enjoying  an  income  in  idleness  is  considered 
creditable   and   honored? 

State  insurance  is  so  obviously  superior  to  any  other  plan 
that  it  will  have  to  be  adopted  eventually,  no  matter  what 
else  is  tried.  There  is  one  substantial  objection  to  state  in- 
surance,— the  private  liability  companies.  The  question  of 
constitutionality  is  of  much  less  importance  for  us  than  some 
would  think.  The  liability  companies  prefer  the  compen- 
sation act  to  state  insurance.  And  they  will  have  no  diffi- 
culty in  bringing  the  courts  about  to  see  "the  light  of  rea- 
son." 

Survey.  28:  248-9.  May  4,  1912. 

Difference    Between     the     English     and     German     Systems     of 
Workmen's  Compensation.     E.  C.  Schwedtman. 

The  basic  difference  between  the  English  and  German 
workmen's  compensation  systems  is,  that  under  the  English 
scheme  the  burden  of  compensation  for  injuries  is  thrown 
upon  the  individual  employer  and  made  a  feature  of  his  in- 
dividual relationship  with  his  employes.  Under  the  German 
scheme  individual  responsibility  is  eliminated  and  the  burden 
of  compensation    is    solved    by    compulsory   insurance. 

Experts  of  all  European  nations,  including  England,  as- 
sembled in  Rome  in  1908  and  again  at  The  Hague  in  1910 
recognized  officially  "compulsory  insurance"  as   the   best  and 


i82  SELECTED  ARTICLES 

most  efficient  means  of  reducing  human  and  economic  loss 
from  work-accidents,  sickness,  and  invalidity.  During  my 
European  investigation  I  found  a  general  pessimism  and 
dissatisfaction  among  Englishmen  with  their  scheme,  and 
general  optimism  and  satisfaction  among  Germans  with  their 
system. 

Lloyd-George's  national  insurance  bill,  which  was  passed 
recently  by  the  British  parliament,  is  suggestive  of  an  in- 
tended nucleus  for  a  general  system  of  compulsory  insurance 
which  will  ultimately  displace  the  present  English  system. 
Speaking  of  this  recent  English  act  the  Bulletin  Des  Assur- 
ances Sociales  says :  "Here  is  Bismarck  out-Bismarcked  and 
Mr.  Lloyd-George  has  gone  farther  than  the  first  initiator 
of   German  workers'  insurance." 

An  analysis  of  German  accident  insurance  expenditures 
for  1908  shows  77-V4  per  cent  of  the  total  expenditures  paid 
to  injured  workers  or  their  dependents;  g}^  per  cent  for  re- 
serve fund;  734  per  cent  for  management;  2)4  per  cent  for 
investigations;  iJ4  per  cent  for  litigation;  1-J/4  per  cent  for 
prevention  activities,  etc.  Such  efficiency  is  entirely  unknown 
in  the  United  States  or  in  England,  and  especially  are  the 
legal  expenditures  of  1%   per  cent  remarkably  low. 

I  saw  accident  prevention  practiced  more  generally  and 
systematically  under  the  German  scheme  than  under  the 
English  law.  An  English  commission,  consisting  of  members 
of  the  Labor  Party  and  trade  union  commission,  says,  after 
a  visit  to  Germany,  in  its  official  report:  "One  effect  of 
all  this  .  .  .  organization  is  to  prevent  the  hideous  open 
social  sores,  with  which  we  in  Great  Britain  are  so  familiar. 
There  are  certainly  poor  in  Germany  .  .  .  but  there  are  few 
so  utterly  broken  on  the  wheel  of  misfortune  as  those  who 
are  allowed  with  us  to  wander  about,  parading  their  sores 
and  propagating  their  kind.  .  .  .  Germany,  individually  and 
collectively,  is  realizing  itself  and  organizing  itself.  .  .  . 
We  are  convinced  that  it  is  having  considerable  efifect  at 
present  in  increasing  the  productive  efficiency  of  the  nation." 

Professor  Edouard  Fuster  of  Paris,  one  of  the  greatest 
international    experts    upon    this    subject,    says:    "The    money 


COMPULSORY  IXSURANCE  183 

which  German}'  is  devoting  to  social  insurance  reappears  in  a 
thousand  forms.  It  promotes  happiness  of  the  familj-, 
health,  and  self-respect.  It  makes  for  a  strong,  enduring 
nation  and  for  international  supremacy." 

Dr.  Paul  Kaufman,  president  of  the  German  Imperial 
Insurance  Department,  writes  me  as  follows: 

"It  is  not  an  accident  that  the  unprecedented  expansion 
of  German  commerce  and  industry  has  happened  concurrent- 
ly with  thorough-going  improvement  in  the  condition  of 
workers.  There  is  a  close  connection  between  the  two 
events.  The  successful  handling  of  the  labor  problem  by 
means  of  social  insurance  is  one  of  the  strongest  factors  in 
Germany's    constantly    growing    industrial    progress." 

Dr.  Spiecker,  president  of  the  Siemens  and  Halske  Com- 
pany of  Berlin,  writes  me  as  follows: 

"It  is  perfectly  evident  today  that  we  have  secured  higher 
efficiency  in  our  industries  due  to  increased  workers'  efficien- 
cy, all  brought  about  by  relieving  our  workers  from  worry 
and  distress,  due  to  sickness,   injury,   and  superannuation." 

Dr.  Zacher,  director  of  the  Imperial  Statistical  Depart- 
ment, who  is  honored  and  respected  internationally  as  prob- 
ah\y  no  other  German  expert,  wrote  me  nearlj-  a  year  ago: 

"His  [Dr.  Friedensburg's]  statements  must  not  be  taken 
too  seriously.  He  has  been  generally  known,  even  during 
his  active  connections  with  the  Imperial  Insurance  Depart- 
ment, as  the  solitary  advocate  of  extreme  tendencies.  His 
articles  show  an  unwarranted  tendency  to  condemn  a  great 
national  social  insurance  system  on  account  of  a  few  trifling 
shortcomings  in  some   of  its  details." 

A  clipping  from  a  recent  issue  of  Neuc  Polifischc  Corrcspon- 
deiiz   Berlin    reads,    translated,   as    follows: 

"It  is  proper  to  call  attention  to  the  fact  that  Friedens- 
burg's statements  are  in  mau}^  directions  incorrect  and  make 
individual  shortcomings  appear  general  to  an  unwarranted 
degree.  As  a  whole  Dr.  Friedensburg's  statements  give  a 
wrong  picture  of  the  results  of  German  workers'  insurance 
and    are,   therefore,   unfitted   to   inform    foreign    countries    ac- 


i84  SELECTED  ARTICLES 

curately     and     conclusively     concerning     German     workers'     in- 
surance  system." 

Let  me  say  in  conclusion  that  we  cannot  and  will  not 
transplant  either  the  English  or  the  German  scheme  as  a 
whole,  but  we  must  study  all  foreign  systems  and  translate 
their  best  features  into  American  ways  of  thinking  and  doing 
things.  This  alone  will  give  us  a  system  in  keeping  with 
the  institutions  and  the  traditions  of  the  United  States. 


American  Journal  of  Sociology.  17:  177-87.  September,  1911. 

German    Workingmen's    Insurance    and    Foreign    Countries. 
Georg  Zacher. 

Looking  over  the  previous  development  of  German  work- 
ingmen's insurance,  it  is  desirable  to  present  in  this  journal 
the  international  standpoint,  and  to  sketch  the  manifold 
relations  between  the  German  workingmen's  insurance  and 
foreign  countries. 

First  of  all  the  question  is  urged,  How  far  have  the  ob- 
jections which  other  countries,  both  formerly  and  at  present, 
have  brought  against  the  bold  enterprise  of  Germany  been 
removed    or  confirmed   by   the    actual   development? 

If  we  follow,  in  the  previous  discussions  in  journals,  and 
in  the  acts  of  the  international  workingmen's  insurance  con- 
gresses, the  history  of  the  foreign  workingmen's  insurance 
legislation,  it  appears  that  a  principal  hindrance  to  imitating 
the  German  example  consistently  is  almost  everywhere  the 
fear  of  a  financial  burden;  that  is,  a  strain  upon  the  indus- 
trial capacity  of  the  various  occupations,  and  consequently  a 
disadvantage  in  international  competition  between  nations. 
This  fear  has  been  skilfully  used  by  the  opponents  on  prin- 
ciple of  every  form  of  social  legislation,  even  apart  from 
compulsory  insurance.  The  wider  the  circles  of  German 
workingmen's  insurance  extended  and  the  greater  the  an- 
nual expense  of  millions  for  indemnities  and  capital  reserves 
increased,  the  more  these  opponents  referred  to  the  danger 


COMPULSORY  INSURANCE  i8s 

of  the  assessment  methods  of  the  German  accident  insur- 
ance, and  the  billions  required  by  invalid  and  old-age,  not 
to  mention  orphan  and  widow,  insurance  in  their  own  coun- 
tries. The  parliamentary  reports  of  all  European  states 
which  have  considered  such  projects  of  law  contain  only  too 
much  material  on  the  subject. 

What  is  the  teaching  of  actual  trial? 

In  the  field  of  accident  insurance,  not  in  Germany,  but  in 
those  countries  which  did  not  follow  the  German  examples, 
financial  and  technical  insurance  problems  have  arisen,  and 
this  because  they  were  compelled  to  throw  overboard 
premium  rates  and  calculations  of  payments  which  had  no 
adequate  basis,  and  which,  therefore,  proved  false  in  the 
tests  of  practice.  In  this  connection  reference  may  be  made 
to  the  failure  of  the  technical  insurance  figures  of  the  Aus- 
trian, Norwegian,  and  Holland  accident  insurance,  of  the 
experimental  premium  tables  of  the  F"rench,  Belgian,  and 
English  private  insurance  societies,  and  others.  On  the 
contrary,  the  German  accident  insurance  was  free  from 
these  mistakes;  has  developed  normally,  and  enjoys  increas- 
ing recognition  abroad.*  The  best  proof  of  this  is  that  the 
insurance  plans  copied  after  those  of  the  German  trade- 
insurance  associations,  as  of  late  in  England  and  France, 
have  manifestly  worked  with  advantage;  and  that  in  the 
United  States  of  America,  which  now  is  thoroughly  inter- 
ested in  these  questions,  the  approval  of  the  German  example 
seems  to  be  gaining  ground,  not  merely  on  account  of  the 
simplicity  and  economy  of  the  whole  system,  but  also  be- 
cause of  its  superiority  in  the  important  field  of  accident 
prevention. 

In  reference  to  the  invalid  and  old-age  insurance  we  may 
learn  from  the  proceedings  of  the  last  International  Social 
Insurance  Congress  at  Rome,  in  1908,  especially  in  the  con- 
fessions of  Luzzatti  and  Mabilleau,  and  from  the  thirty 
years  of  previous  history  of  the  French  law  of  April  10,, 
1910,  that  in  this  field  thorough  success  without  compulsion; 
to  insure  cannot  be  assured.  On  the  other  hand,  German^ 
experience   shows   that  the   fantastic   milliard   calculations   of 


i86  SELECTED  ARTICLES 

opponents  could  practically  be  met,  and  that  the  capital  col- 
lected to  pay  claims  as  they  fall  due  was  not  only  not  ,a 
danger  for  the  public  welfare,  but  in  reality  an  unending 
blessing;  as  has  been  shown  by  persons  free  from  bias. 

Has  this  entire  burden  of  the  German  people,  by  its 
social  insurance,  become  a  hindrance  to  national  progress, 
and  to  the  capacity  for  competition  in  international  trade — 
as  has  been  asserted  in  the  past  and  is  still  sometimes 
claimed?     Here  also  the  facts  may  speak  for  themselves. 

It  is  precisely  in  the  last  quarter  of  a  century,  under  the 
regime  of  social  legislation,  that  Germany  has  increased  its 
population  from  forty-six  to  sixty-five  millions,  now  about 
at  the  rate  of  one  million  each  year;  and  has  advanced  from 
the  fourth  to  the  second  place  in  the  world's  trade;  and 
now,  with  its  seventeen  billion  marks  of  foreign  trade,  is 
behind  the  British   Empire  by  only  a  few  billions. 

The  property  of  the  people  at  the  same  time  has  doubled 
in  value,  and  at  present  is  reasonably  estimated  to  be  about 
two  hundred  and  fifty  billions.  The  annual  income  of  the 
people  is  about  thirty  billions  of  marks.  There  are  about 
eighteen  million  savings-bank  accounts  with  annual  deposits 
of  three-fourths  of  a  billion,  and  property  which  has  risen 
in  value  from  two  billions  in  1875  to  fourteen  billions.  In 
this  improvement  the  workingmen,  the  majority  of  the  na- 
tion, have  an  increasing  share.  The  wages,  as  proved  by 
social-insurance  statistics  and  expert  investigations  (for  ex- 
ample, Schmoller,  Dade,  Calwer,  Kuczynski,  Ashley,  etc.), 
since  the  introduction  of  the  imperial  workingmen's  insur- 
ance laws,  have  risen,  on  the  average,  for  unskilled  workmen 
about  25  per  cent.,  and  for  skilled  workmen  about  50  per 
cent,  and  in  certain  trades  even  100  per  cent.  And  this  in- 
crease of  wages,  which,  according  to  Professor  Ashley,  has 
not  been  attained  in  any  other  country,  has  by  no  means  been 
counteracted  by  the  increase  of  cost  of  means  of  subsistence, 
even  according  to  the  judgment  of  social-democratic  leaders 
and  scientific  journals.  According  to  household  budgets 
and  statistics,  the  expenditures  for  the  means  of  subsistence, 
on    the    average,    require    only    half    the    income.     The    con- 


COMPULSORY  IXSURANCE  187 

sumption  of  the  necessary  means  of  subsistence  has  steadily 
increased,  the  use  of  meat  remaining  only  a  little  below  that 
of  the  English  population;  so  that  the  living  conditions  of 
German  workmen,  as  an  English  commission  has  abundantly 
proved,  have  improved  in  all  directions.  Furthermore,  the 
statistics  of  taxes  show  that  the  number  of  persons  with 
taxable  property  has  increased;  and  that,  in  agreement  with 
this  fact,  the  wage  statistics  of  this  great  sickness-insurance 
funds,  and  the  accounts  of  the  sale  of  stamps  for  the  invalid- 
insurance  funds  show  an  ascent  of  insured  persons  up  from 
the  group  of  low-paid  workers  to  that  of  the  more  highly 
paid  wage-earners  (cf.  Reichs-Arbcitsblatt).  To  all  this  we 
must  add  that  the  figures  relating  to  unemployment  are  low- 
est in  Germany;  that  emigration,  which  was  so  great  in  the 
decade  1880-90,  has  almost  ceased;  that,  on  the  other  hand, 
Gennany  of  late  needs  almost  a  million  foreign  workmen  in 
order  to  cover  the  needs  of  manufactures  and  agriculture 
(cf.  Dad^).  But  it  is  not  merely  in  material  advance  that 
the  majority  of  the  people  have  shared.  According  to  the 
most  recent  publications  the  apparent  longevity  rose  from 
38.1  to  48.85  years  for  males  and  from  42.5  to  54.9  years  for 
women;  the  general  rate  of  mortality  has  diminished  consid- 
erably; mortality  from  tuberculosis  has  fallen  nearly  one- 
half,  so  that  there  is  ground  for  hope  that  this  dangerous 
plague,  within  a  reasonable  time,  will  come  under  control — 
a  hope  whose  fulfilment  could  hardly  be  expected  without 
the  powerful  organization  of  social  insurance.  To  all  this 
we  add  the  consideration,  that  social  insurance,  with  i!ts 
curative  and  preventive  measures,  offers  advantages  annual- 
ly to  millions  of  workmen  and  their  families.'  Thereby  not 
only  the  vast  number  of  workers  of  the  nation  is  maintained, 
but  their  vital  energy  is  also  greatly  augmented  by  popular 
hygienic  education.  Thus  we  can  explain  why,  in  spite  of 
the  rapid  development  of  German  manufactures,  both  the 
number  and  physical  condition  of  recruits  show  an  upward 
tendency. 

If  we  put  together  all  these  considerations,  we  can  claim, 
in   opposition   to   the   assertion   mentioned   above,   that   social 


i88    •  SELECTED  ARTICLES 

insurance  has  been  a  co-operating  cause  of  the  unexampled 
advance  of  German}-.  In  the  increasing  recognition  of  these 
economic  effects  we  may  discover  the  explanation  of  the 
more  rapid  progress  in  similar  legislation  in  other  countries. 

Another  point  at  which  foreigners  have  hesitated  is  the 
organization.  They  have  criticized  the  enormous  apparatus 
which  requires  a  legion  of  officials,  so  complicated  that  it 
could  not  be  kept  in  motion  except  in  a  country  under  a 
strictly  military  control  like  Germany.  We  have  already 
explained  how  the  threefold  division  of  the  German  social 
insurance  laws  (sickness,  accident,  and  invalid  insurance), 
and  the  complex  forms  of  organization,  arose  naturally  out 
of  the  historical  development.  It  has  been  possible  to 
open  new  ways,  while  joining  the  new  to  existing  arrange- 
ments, and  utilizing  them  for  the  general  purpose;  and  im- 
provements are  introduced  in  consequence  of  practical  ex- 
periments. This  has  happened  in  the  reform  laws  of  the 
decade  1890  to  1900  (K.  V.  G.  1892.  J.  V.  G.  1899,  U.  V.  G. 
1900),  and  will  be  further  manifest  in  the  new  imperial  in- 
surance regulations. 

Both  reforms  have  left  the  foundations  of  the  system 
unchanged.  We  have  declined  to  admit  any  blending,  or 
uniformity  of  organization;  and  this  is  the  best  proof  that 
the  German  social  insurance,  in  spite  of  the  variety  of-  forms, 
was  built  on  sound  principles,  and  that  the  various  forms  of 
organization  had  good  reason  for  being,  in  the  difiference  of 
the  risks  to  be  insured.  Yet  not  a  few  of  those  who  have 
had  practical  experience  in  administering  the  legislative 
measures  believe  that  the  purpose  of  these  reforms  would 
have  been  more  easily  and  surely  attained,  if.  even  in  the 
year  1895,  the  well-known  reform  propositions  of  Bodiker 
and  his  brilliant  talent  of  organization  of  such  insurance 
plans  had  been  given  a  freer  chance.  But  every  reform  of 
organization  and  administration  finds  all  the  stronger  op- 
position where  the  particular  organizations  have  been  thor- 
oughly established.  This  has  been  well  shown  in  relation  to 
the  simplification  and  increased  centralization  of  sickness  in- 
surance, and  the  two  projects  for  the  German  Imperial  In- 


COMPULSORY  INSURANCE  189 

surance  Regulations  (April,  1909,  and  March,  1910)  and 
of  the  reform  propositions  in  Austria  (December,  1904,  and 
November  3,   1908). 

Foreign  countries  may  well  be  grateful  to  Germany  for 
its  many-sided  pioneer  labors.  It  has  been  made  possible, 
without  costly  experiments,  to  utilize  the  practical  applica- 
tions; and  they  would  do  well  to  take  into  account,  at  the 
beginning,  the  ultimate  good  of  the  development  and  pro- 
vide in  good  time  for  the  reforms  and  extensions  which  will 
later   be   required. 

Perhaps  the  most  important  objections  against  the  "Ger- 
man system"  abroad  have  been  made  on  moral  grounds. 
The  charge  was  made  that  it  weakens  the  sense  of  individ- 
ual responsibility;  that  it  intensifies  the  cupidity  of  the 
masses;  that  it  demoralizes  the  working-people.  Those  ob- 
jections were  supported  by  reference  to  the  continually  ris- 
ing costs  of  sickness  insurance  and  of  the  sick-benefit  funds, 
which  have  been  exploited  by  the  imemployed  members  who 
are  in  good  health,  and  by  reference  to  the  increasing  desire 
for  pensions  and  the  larger  number  of  lawsuits  for  pensions. 

The  first  reproach,  that  compulsory  insurance  undermines 
the  sense  of  responsibility,  the  inclination  to  save,  and  the 
industrial  efficiency  and  capacity  for  development  of  workers, 
can  hardly  be  longer  supported.  The  facts  presented  at  the 
Congress  at  Rome  (1908),  and  in  statistical  publications,  do 
not  favor  this  view.  In  any  case  it  is  better  for  the  common 
welfare  that  the  masses  be  educated  by  legal  obligation  to 
the  fulfilment  of  their  social  duties  than  that  they  be  left  in 
lethargy  and  helplessness.  The  long  experience  of  Ger- 
many, as  compared  with  other  countries,  teaches  that,  on 
the  average,  the  wage-earners  are  not  able,  without  aid,  to 
procure  an  adequate  and  sure  support  in  cases  of  sickness, 
accident,  invalidism,  and  old  age;  they  need  such  a  system 
as  that  of  the  German  social-insurance  laws,  as  well  as  the 
intellectual  and  financial  co-operation  of  employers.  If  we 
desire  to  diminish  and  gradually  to  overcome  the  present 
social  antagonism,  we  may  look  with  hope  to  common  effort 
on    the   humanitarian    basis    of   social   legislation,   and   to   the 


I90  SELECTED  ARTICLES 

works   of  voluntary  welfare-schemes   whicli   are   closely   con- 
nected with  such  legislation. 

With  good  reason,  the  new  imperial  insurance  ordinance, 
following  the  example  of  the  invalid  insurance  and  the  Hun- 
garian reform  legislation,  looks  forward  to  an  equal  divi- 
sion of  contributions  and  administrative  rights  of  employees 
and  employers  in  sickness  insurance.  Other  considerations 
of  economy  and  justice  favor  this  measure.  The  division  of 
premiums  in  the  original  law  of  1883,  according  to  which  the 
employees  paid  two-thirds  and  the  employers  one-third,  may 
have  been  appropriate  to  the  simple  industrial  relations  of 
that  period,  when  the  danger  from  general  causes  of  illness 
seemed  more  important  than  the  specific  "occupational  dis- 
eases" which  have  lately  received  more  attention.  At  the 
present  time,  on  the  contrary,  especially  in  consequence  of 
the  varied  methods  of  chemical  production,  the  development 
is  in  a  different  direction.  Therefore,  it  would  be  unfair  to 
lay  the  principal  burden  on  the  wage-earners,  since  the 
risks  of  these  increasingly  dangerous  "occupational  diseases"' 
should  be  logically  regarded  as  risks  of  the  trade,  like  acci- 
dents. The  indemnities  should  be  regarded  in  the  same 
light  as  those  for  accidents,  as  is  already  done  in  the  Swiss 
and  English  legislation,  and  in  the  projects  of  law  in  France 
and  Russia.  This  holds  good,  even  although,  after  the 
period  of  sickness  indemnity,  the  invalid  insurance,  if  only 
inadequately,  offers  some  relief.  To  this  must  be  added  the 
consideration  that,  with  the  equal  division  of  sickness-m- 
surance  premiums,  it  is  proposed  in  the  imperial  ordinance 
of  insurance  to  extend  the  sickness  insurance  to  all  agricul- 
tural and  household  industries,  etc.,  and  provide  insurance 
for  widows  and  orphans  of  wage-earners  without  increasing 
the  payments  of  workmen.  The  conflict  over  the  question 
of  insurance  doctors  might,  perhaps,  have  been  avoided,  or 
have  taken  a  milder  form,  if  from  the  beginning  there  had 
been  complete  equality  of  representation  of  employers  and 
employees  in  the  committees  on  sickness  insurance.  It  has 
been  apparent  that  the  "free  choice  of  doctors"  demanded 
by   physicians    might   introduce   serious   difficulties    in    social 


COMPULSORY  INSURANCE  191 

insurance  in  great  cities  and  industrial  centers,  especially 
so  long  as  preparation  for  this  kind  of  medical  service  is 
not  required  by  law.  How  little  the  legal  introduction  of 
'■free  choice  of  doctors"  would  relieve  the  economic  need 
where  the  medical  profession  is  crowded  may  be  seen  from 
the  evidence  presented  at  the  congress  at  Rome  and  in  the 
last  international  conference  at  The  Hague  (September, 
1910).     ■ 

In  the  field  of  accident  insurance,  the  principle  of  equal- 
ity, contrary  to  the  view  of  Bismarck,  has  been  broken 
down,  to  the  extent  that  the  wage-earners,  in  cases  of  deci- 
sions at  the  first  hearing,  as  contrasted  with  both  hearings 
in  the  higher  courts,  are  excluded.  This  has  produced  two 
evils:  on  the  one  side  the  workingmen  show  great  distrust 
of  the  employers'  associations,  in  spite  of  the  larger  indemni- 
ties; and,  on  the  other,  the  imperial  insurance  office,  in  con- 
trast with  the  invalid-insurance  office,  for  which  it  has  mere- 
ly powers  of  revision,  having  to  decide  appeals,  is  burdened 
with  the  re-examination  of  facts  in  disputes  of  little  impor- 
tance, and  is  unable  to  give  full  attention  to  its  tasks  as  a 
supreme  court.  The  imperial  insurance  ordinance  seeks  to 
overcome  this  error  of  the  earlier  legislation  by  making 
the  first  court  (as  an  "insurance  office")  equally  representa- 
tive of  both  parties,  as  has  already  been  done  from  the  be- 
ginning by  Austrian,  Hungarian,  and  Luxemburg  legislation; 
by  clothing  the  intermediate  court  with  greater  powers  of 
final  decision  as  to  facts,  as  a  "superior  insurance  office," 
and  by  treating  the  imperial  insurance  office  as  the  court  of 
final  revision  for  all  branches  of  social  insurance,  including 
sickness  insurance,  which  has  not  hitherto  been  in  its  juris- 
diction. This  overburdening  of  the  imperial  insurance  office 
with  annually  increasing  appeals  in  a  gratuitous  procedure, 
and  the  fact  that,  in  spite  of  the  benevolent  legal  decisions  of 
the  imperial  insurance  office,  scarcely  i  per  cent  of  the  al- 
most one-half  million  annual  decisions  of  appeals  from  the 
employers'  associations  have  been  reversed — in  itself  a  strik- 
ing proof  of  their  justice — are  regarded  abroad  as  certain 
evidence   of  the   weakness   of  the   German   insurance   system; 


192  SELECTED  ARTICLES 

evidence,  that  is,  of  the  disappearance  of  a  sense  of  re- 
sponsibility and  justice  of  those  who  are  obliged  by  law  to 
insure,  of  the  increasing  unrest  and  eagerness  to  receive 
pensions  on  the  part  of  those  injured  by  accidents,  of  the 
abuse  of  the  gratuitous  procedure,  and  of  the  demoralization 
of  the  workingmen  by  unscrupulous  shyster  lawj^ers.  The 
fact  is  often  overlooked  that  a  compulsory  insurance,  with 
nearly  twenty-four  inillion  insured  persons,  must  include 
many  from  the  lower  social  classes;  that,  considering  this 
vast  number,  the  abuses  mentioned  are  entirely  exceptional; 
and  that  they  might,  perhaps,  have  been  avoided  if  such 
regulations  as  the  imperial  ordinances  of  insurance  now  con- 
tain, and  which  would  supply  gratuitous  official  legal  coun- 
sel for  the  benefit  of  the  wage-earners,  had  been  included  in 
the  original  laws.  In  any  case  these  evils  can  without  dif- 
ficulty be  cured  by  better  instruction  of  the  persons  interest- 
ed, by  elevating  their  plane  of  culture,  by  giving  a  hearing 
to  the  workmen  in  the  court  of  first  instance,  by  stricter 
management  of  the  costs  in  case  of  appeals  to  litigation 
without  cause,  and  by  avoiding  too  generous  awards  by 
courts. 

Incomparably  greater  dangers  of  a  moral  and  financial 
kind  maj''  arise  where  neither  compulsory  insurance  nor 
gratuitous  judicial  settlement  exist;  as  may  be  seen  in  the 
experience  with  the  English  accident  insurance.  There  the 
employers,  from  fear  of  the  terrible  costs  of  litigation,  bring- 
hardly  I  per  cent  of  cases  of  industrial  accidents  before 
the  courts.  In  most  cases  of  litigation,  when  the  activity 
of  unscrupulous  advocates  and  complaisant  physicians  is 
certain,  they  prefer  to  pay  an  injust  compensation  rather 
than  run  the  risk  of  a  suit. 

In  general,  the  acts  of  the  international  social  insurance 
congresses,  especially  that  of  Rome  in  1908,  in  connection 
with  the  twenty-five  years  of  experience  in  Germany,  have 
shown  conclusively  that  without  legal  compulsion  the  social 
and  economic  purpose  of  a  thorough  social  insurance  can- 
not be  attained;  and  that  individual  cases  of  abuses  should 
not  be  given  too  great  weight;  they  are  simply  passing  and 


COMPULSORY  INSURANCE  193 

by  means  unavoidable  accompaniments  of  the  great  scheme. 
Such  general  human  weakness  may  be  observed  also  in  the 
case  of  voluntary  and  all  other  kinds  of  insurance.  The 
German  principle,  furthermore,  is  superior  to  the  liberie 
subsidiee  in  this,  that  it  involves  both  parties,  workmen  and 
employers,  in  the  cost  of  premiums,  and  so  places  the  entire 
insurance  system  on  a  firmer,  clearer,  and  juster  basis,  and 
makes  it  evident  to  the  workmen  that  the  contribution  of 
the  employer  is  not  a  "subvention"  but  something  which 
they  have  themselves  earned.  A  glance  over  the  survey 
proves,  however,  that  the  legislation  of  scarcely  one  of  the 
countries  there  treated  shows  an  exclusively  obligatory  or 
voluntary  insurance;  rather  both  kinds  of  insurance  run  side 
by  side  in  independent  laws  for  each  branch  of  insurance  and 
trade,  or  they  supplement  each  other  in  the  same  laws.  In 
recent  development  of  social  insurance,  in  the  German  proj- 
ects and  in  the  plans  for  insuring  private  ofificials,  the  ten- 
dency is  observed  to  follow  the  lines  of  agreement  at  the 
congress  in  Rome;  that  is,  to  provide  the  minimum  required 
by  necessity  in  the  way  of  compulsory  insurance  and  open 
the  way  of  voluntary  insurance  for  a  maximum  which  may 
be  accessible  and  desirable  to  some  individuals  and  callings. 

In  fact,  in  this  way,  by  opening  up  to  the  more  intelli- 
gent and  strong  a  more  complete  means  of  caring  for  them- 
selves, in  addition  to  the  necessarily  obligatory  method 
with  the  weaker  members  of  society,  the  defects  in  the  pres- 
ent system  may  most  securely  be  overcome. 

That  all  modern  civilized  states  are  striving  toward  this 
common  goal  is  shown  in  the  general  survey  already  men- 
tioned, and  that,  in  consequence  of  international  migration 
of  laborers,  the  points  of  contact  multiply,  is  proved  by  the 
increasing  number  of  treaties  on  the  principles  which  were 
first  recognized  by  the  Franco-Italian  labor  agreement  of 
April  IS,  1904,  and  there  developed  into  a  program. 


194  SELECTED  ARTICLES 

Outlook.  94:  939-46.  April  23,  1910. 

How   German}'   Cares   for   Her  Working   People. 

Erederic  C.   Howe. 

One  can  speak  with  far  more  enthusiasm  of  the  protec- 
tion assured  the  worker  from  accident,  sickness,  and  the 
misery  of  a  workless  old  age.  Even  the  Socialist  admits 
that  these  are  steps  in  the  right  direction. 

Insurance  against  sickness  has  been  provided  since  1884. 
It  is  provided  for  those  employed  in  factories,  mines,  work- 
shops, quarries,  transportation,  and  other  industries.  Em- 
ployees of  public  enterprises  are  also  covered.  The  provi- 
sions of  the  law  are  limited  to  those  whose  wages  are  below 
$500  a  year.  The  sickness  insurance  funds  are  of  various 
kinds.  There  are  local  funds  provided  by  the  parishes  for 
all  of  the  trades  within  their  limits.  Some  of  the  large  in- 
dustries have  funds  of  their  own,  as  do  the  mine-owners  and 
the  contractors  in  the  building  trades. 

All  of  the  funds  provide  for  free  medical  attendance  and 
supplies  as  well  as  sick  pay  from  the  third  day  of  sickness. 
The  benefits  amount  to  one-half  of  the  daily  wages  received 
by  the  beneficiary  or  the  amount  upon  which  his  assess- 
ment is  based.  Benefits  are  continued  for  not  more  than 
twenty-six  weeks,  after  which  time,  if  the  illness  still  con- 
tinues, tlie  l)urden  is  transferred  to  the  Accident  Insurance 
Fund. 

The  insurance  fund  is  sustained  b}'  the  workingmen.  the 
employers,  and  to  some  extent  by  the  community.  Gen- 
erally the  employee  pays  two-thirds  of  the  premium  and  the 
employer  one-third,  the  liability  of  both  being  ascertained 
by  periodic  reports  from  the  employer  as  to  the  number  of 
employees  liable  to  insurance.  The  premiums  are  collected 
by  stoppage,  the  employer  deducting  the  assessments  of  the 
employees  when  wages  are  paid,  which,  along  with  his  own 
share,  are  then  transmitted  to  the  fund. 

The  administration  of  the  funds  is  largely  in  the  hands 
of  the  working  people   themselves,   through   a   board   chosen 


COMPULSORY  INSURANCE  195 

by  the  employers  and  the  employees.  General  meetings 
are  held  at  which  all  persons  who  contribute  to  the  fund 
may  come,  at  which  meetings  the  delegates  who  have  charge 
of  the  insurance  are  elected.  About  12,000,000  persons  are 
insured  against  sickness  in  the  Empire. 

A  second  insurance  fund  is  provided  against  accident. 
The  provisions  of  the  law  cover  substantially  the  same  class- 
es as  the  sickness  insurance,  and  the  method  of  administra- 
tion is  substantially  the  same.  The  employer  is  bound  to 
provide  insurance  against  accident,  as  in  the  case  of  sick- 
ness. Upon  opening  a  factory  he  automatically  becomes  a 
member  of  the  trade  association  covering  his  business,  and  is 
bound  to  contribute  to  the  insurance  fund.  This  fund  is 
managed  by  the  executive  board  of  the  trades,  which  has 
power  to  classify  trades  and  fix  the  danger  schedule.  But. 
better  than  this,  the  board  has  power  to  enforce  rules  and 
appliances  for  the  prevention  of  accident.  If  a  member  re- 
fuses to  abide  by  the  ruling  of  the  board,  he  may  be  fined 
for  his  neglect,  or  his  danger  rating  is  increased. 

By  this  means  the  employers  are  stimulated  to  an  interest 
in  safety  devices,  while  the  special  knowledge  on  the  part  of 
the  individual  trade  association  leads  to  a  better  adminis- 
tration of  the  rules  than  would  be  possible  on  the  part  of 
the  State.  In  all  of  these  matters  the  employees  are  con- 
sulted. They  are  also  allowed  representation  on  the  execu- 
tive board. 

Benefits  under  the  accident  insurance  law  are  not  left  to 
judicial  inquiry.  The  employee  is  not  put  to  the  expense 
and  delay  of  a  long  litigation.  Even  though  the  employee  is 
negligent,  he  is  entitled  to  compensation,  unless  there  should 
be  evidence  that  he  intentionally  brought  the  accident  upon 
himself.  Here,  as  in  sickness,  the  cost  of  human  wreckage 
in  industry  is  shifted  in  part  on  to  the  cost  of  production. 
It  is  passed  on  to  the  community  where  it  belongs. 

The  amount  of  the  compensation  paid  depends  upon  the 
wages  of  the  employee  and  the  extent  of  the  injury.  If  the 
accident  wholly  incapacitates  the  worker,  he  receives  a  full 
pension,   which   amounts    to    two-thirds   of   his    yearly   wage. 


196  SELECTED  ARTICLES 

If  he  is  still  able  to  work,  the  pension  is  adjusted  to  his 
earning  abilit3^  In  case  of  accident  resulting  in  death,  an 
immediate  payment  of  about  one-sixth  of  the  yearly  wage  is 
paid.  In  addition  to  this,  the  widow  and  dependent  chil- 
dren are  pensioned,  the  widow  until  her  death  or  remarriage 
and  the  dependent  children  up  to  their  fifteenth  year.  In 
this  event  the  annual  pension  does  not  exceed  sixty  per  cent 
of  the  annual  wage. 

Not  only  is  the  German  workman  thus  insured  against 
sickness,  which  marks  the  beginning  of  much  of  the  poverty 
of  our  cities,  as  well  as  against  the  accidents  of  industrial 
establishments,  which  fill  the  hospitals  with  the  bulk  of  their 
patients,  but  practically  all  German  workmen  are  insured 
against  old  age.  Those  whose  earnings  exceed  $500  are  not 
covered  by  old  age  insurance,  nor  are  the  higher  class  of 
employees  and  servants.  The  administration  of  this  branch 
is  carried  on  by  insurance  societies,  which  cover  certain 
sections,  or  by  the  State  at  large.  All  of  them  are  under 
the  supervision  of  the  State  and  are  controlled  by  the  em- 
ployers and  the  employees.  The  old  age  funds  are  supplied 
by  the  employers  and  the  employees,  who  contribute  in 
equal  shares  to  the  fund.  To  this  the  Empire  adds  $12.50 
towards  every  pension. 

The  amount  of  the  benefit  received,  it  is  true,  is  not  very 
large.  It  is  not  sufficient  in  itself  to'  support  the  recipient. 
It  amounts  to  from  $27.50  to  $60  a  year,,  according  to  the 
wages  enjoyed  or  the  premiums  paid  by  the  beneficiary. 

The  success  of  these  insurance  schemes  is  seen  by  the 
number  of  members  enrolled.  There  were  18,000,000  insured 
against  accident  in  1903  and  13,500,000  against  old  age.  The 
total  expenditures  of  the  various  funds  amounted  to  over 
$100,000,000,  while  the  funds  accumulated  as  a  reserve  ex- 
ceeded $350,000,000. 

Aside  from  the  positive  accomplishments  of  the  German 
Empire  in  this  line  of  social  reform,  one  is  impressed  with 
the  seriousness  with  which  the  cities  as  well  as  the  nation 
are  considering  the  whole  question.  There  are  frequent  con- 
ferences  attended   by   representatives    from   the    Empire    and 


COMPULSORY  IXSURANCE  197 

tlie  various  States,  from  the  cities,  the  universities  and  the 
philanthropic  societies.  There  is  nothing  hit  or  miss  about 
it.  The  best  thought  of  the  university  and  the  most  ener- 
getic of  city  officials  are  constantly  studying  ways  and  means 
for  the  relief  of  the  numerous  problems  which  arise  in  con- 
nection with  unemployment,  with  the  hazards  of  industry, 
with  the  poor  and  destitute  members  of  the  community. 
Poverty  has  not  been  abolished  in  Germany.  Nor  has  the 
housing  question  been  solved.  Industrial  depression  takes 
its  tribute  there  just  as  it  does  with  us.  But  the  impressive 
thing  about  it  all  is  that  the  nation  views  these  questions  in 
something  of  the  same  light  that  it  does  the  building  of 
Dreadnoughts,  of  railways,  of  canals,  the  adjustment  of 
taxes,  and  the  building  of  cities. 

Germany  more  than  any  other  country  in  Europe  has 
entered  on  a  comprehensive  programme  of  human  salvage. 
She  is  devoting  her  thought  and  her  energy  to  the  making 
of  people  as  well  as  of  things. 

North  American  Review.   195:   108-19.  January,   1912. 
Insuring  a  Nation.     P.  J.  Lennox. 

The  bill,  in  the  words  of  the  explanatory  memorandum 
which  accompanied  it,  is  intended  to  effect  as  wide  an  in- 
surance as  possible  of  the  working  population.  It  contains 
two  separate  and  distinct  schemes.  The  first  not  only  pro- 
vides insurance  against  total  loss  of  income  through  sick- 
ness, but  also  seeks  both  to  prevent  sickness  and  to  cure  it 
when  it  cannot  be  prevented.  The  second  provides  insur- 
ance against  total  loss  of  income  through  unemployment. 

The  portion  of  the  bill  which  provides  against  total  loss 
of  income  through  sickness  is  also  divided  into  two  parts: 
one  making  such  insurance  compulsory,  the  other  providing 
a  voluntary  method.  Under  the  first  part  provision  is  made, 
except  in  certain  specified  cases,  for  a  compulsory  weekly 
deduction  from  the  earnings  of  every  employee  between  the 
ages  of   fifteen  and  sixty-five  whose  income  falls  below  the 


ige  SELECTED  ARTICLES 

Income  Tax  limit  of  £i6o  ($800)  per  annum,  and  in  every 
such  case  there  will  also  be  a  compulsory  contribution  from 
the  employer,  with  a  further  contribution  from  the  state. 
The  amount  to  be  deducted  every  week  from  the  wages  or 
salary  of  every  non-excepted  employee  who  earns  more  than 
£39  ($195)  a  year  is  46.  (8c.)  for  men,  and  3d.  (6c.)  for 
women;  the  weekly  amount  to  be  contributed  by  the  em- 
ployer for  each  man  and  woman  employee  is  3d.;  and  the 
weekly  amount  to  be  contributed  by  the  state  for  each  is 
2d.  (4c.)  a  week.  In  cases  where  the  earnings  of  the  em- 
ployee are  less  than  £39  a  year,  the  amount  to  be  deducted 
from  the  wages  or  salary  will  be  correspondingly  less,  rang- 
ing from  3d.  down  to  id.  (2c.)  per  week,  while  the  contri- 
bution from  the  employer  will  be  correspondingly  greater, 
in  order  to  keep  the  total  amount  at  9d.  (i8c.)  a  week  for 
men  and  8d.  (i6c.)  a  week  for  women,  for  the  contribution 
of  the  state  still  remains  at  the  constant  figure  of  2d.,  un- 
less in  cases  'in  which  the  weekly  wage  falls  below  9s. 
($2.16).  In  that  case  the  employee's  proportion  will  be 
borne  by  the  state. 

Under  the  voluntary  portion  of  the  scheme,  which  is 
meant  to  apply  to  those  who  earn  their  own  living,  but  who 
work  mainly  on  their  own  account  and  are  not  regularly 
employed  by  others,  the  person  entitled  to  insure  will,  if 
under  forty-five  years  of  age,  contribute  to  the  fund  the  full 
amount  which,  if  they  were  employees,  would  be  paid  by 
the  employee  and  the  employer  combined,  and  the  state 
will  contribute  as  in  the  former  case.  If  over  forty-five  vol- 
untary contributors  will  pay  in  proportion  to  their  age,  such 
rate  to  be  set  forth  in  a  table  which  the  Insurance  Commis- 
sioners will  prepare.  The  voluntary  scheme  appears  to  be 
open  to  every  one  irrespective  of  the  amount  of  income. 

In  return  for  these  contributions,  which  may  be  looked 
upon  as  insurance  premiums,  the  benefits  secured  to  the 
beneficiaries,  after  contributions  extending  over  a  period  of 
not  less  than  six  months,  are  los.  ($2.40)  a  week  for  men, 
and  7s.  6d.  ($1.80)  a  week  for  women  for  the  first  thirteen 
weeks   of   sickness;   5s.    ($1.20)    a   week  for   men  and   women 


COMPULSORY  INSURANCE  199 

alike  for  the  second  tliirteen  weeks;  and  5s.  a  week  for 
men  and  women  who  are  permanently  or  temporarily  dis- 
abled during  the  whole  period  of  such  disablement,  with 
the  proviso  that  disablement  allowance  will  not  be  made 
unless  and  until  the  beneficiary  has  been  a  contributor  for  at 
least  two  years.  There  are  slightly  different  rates  for  young 
unmarried  persons  under  21  years  of  age,  and  for  persons 
who  are  over  50  and  over  60  respectively.  Persons  over  65 
are  excluded  from  the  scope  of  the  bill.  The  payments 
specified  will  be  made  in  full  without  deduction  on  account 
of  contribution,  nor  will  the  non-payment  of  contribution 
during  sickness  or  disableilient  count  against  the  beneficiary. 
In  addition  to  the  money  payments,  there  is  provided  free 
for  the  persons  insured,  a  system  of  medical  treatment  and 
attendance  in  their  own  homes,  or.  in  cases  of  certain  dis- 
eases, in  special  institutions.  Medicines  and  drugs  are  also 
free.  There  are  special  liberal  grants  in  maternity  cases. 
Finally  there  are  prospective  free  medical  treatment,  at- 
tendance and  medicines  for  those  dependent  on  insurers. 

It  is  intended  to  set  aside  a  sum  of  £1,500,000  ($7,500,000) 
to  aid  local  charities  and  local  authorities  to  build  and  equip 
sanatoria  for  dealing  with  what  the  Chancellor  called  the 
terrible  scourge  of  consumption,  and  £1.000,000  {$5,000,000) 
a  year  for  their  staffing  and  upkeep.  The  need  for  this  pro- 
vision is  found  in  the  fact  that  in  the  United  Kingdom  there 
are  between  400,000  and  500,000  persons  affected  with  tuber- 
culosis, and  75,000  deaths  a  year  from  that  cause.  Among 
males  between  the  ages  of  14  and  55  one  out  of  every  three 
dies  of  tuberculosis,  and,  to  make  matters  worse,  as  soon  as 
a  man  is  attacked  by  it  he  becomes  a  recruit  in  the  army  of 
destruction  and  scatters  infection  and  death  in  his  own 
household.  To  stamp  out  this  white  plague  all  the  re- 
sources of  science  will  be  brought  into  play  backed  for  the 
first  time  by  a  nation-wide  measure  of  financial  support. 

It  is  calculated  that  there  will  be  13.100,000  compulsory 
contributors,  800,000  voluntary  contributors,  and  800,000  young 
persons  under  16  affected  by  the  bill,  making  a  grand  total 
of  14,700,000  to  be  included  in  the  scheme  of  insurance  against 


200  SELECTED  ARTICLES 

sickness  and  invalidity.  In  the  first  year,  1912-13.  the  in- 
come from  the  contributions  of  employees  and  employers 
together  will,  according  to  estimate,  amount  to  about  £20,- 
000,000,  of  which  £11,000,000  will  come  from  the  workers 
and  £9,000,000  from  the  employers,  while  the  expenditure 
on  benefits  and  administration  will  in  the  same  year,  in  con- 
sequence of  the  waiting  periods  prescribed  by  the  bill,  be 
only  £7,000,000,  rising  to  £20,000,000  in  1915-16,  the  first 
full  year.  One  feature  of  the  bill  is  that  the  rate  of  contri- 
bution is  uniform  for  all  compulsorily  insured  employees  of 
all  ages  within  the  limits  named,  and  on  this  account  a  heavy 
loss  is  at  first  anticipated,  because  sickness  doubles,  trebles, 
and  even  quadruples  as  people  advance  in  life;  but  by  a 
special  provision  in  the  bill  it  is  inteded  to  wipe  out  that 
loss  in  151^  years.  At  the  end  of  that  period  there  will  be  a 
considerable  sum,  probably  £9,000.000,  released  for  the  pur- 
pose of  increasing  the  benefits.  One  shape  that  such  in- 
creased benefits  may  take  is  the  lowering  of  the  age  for  the 
receipt  of  old-age   pensions   from  the  present  limit   of  70  to 

65- 

Regarding  the  contribution  to  be  made  by  the  state,  it  is 
figured  at  £1,742,000  for  1912-13,  rising  to  £3,359,000  in 
1913-14,  tq  £4,563,000  in  1915-16,  and  to  £6,000,000  at  the 
end  of  the  I5!^2  years'  period. 

The  machinery  for  the  administration  of  this  gigantic 
scheme  of  national  insurance  is  on  the  whole  of  a  fairly 
simple  character.  The  funds  accruing  from  the  various  class- 
es of  contributors  will  be  collected  by  means  of  stamps.  In 
the  compulsory  case,  a  card  will  be  given  to  each  employee, 
who  will  in  turn  take  it  to  his  or  her  employer,  and  at  the 
end  of  each  week  the  employer  will  afiix  to  it  stamps  equiva- 
lent in  value  to  the  employee's  4d..  or  other  amount  ac- 
cording to  the  nature  of  the  case,  and  his  own  3d.,  or  what- 
ever the  correct  amount  may  be.  The  employer  will  of 
course  reimburse  himself  for  the  employee's  contribution  by 
a  deduction  from  the  wages  or  salary.  The  card  stamped 
as  indicated  will  be  handed  to  the  employee,  who  will  in 
turn  take  it  to  tlie  local  post-office.     The  postmaster  will  on 


COM^ULSOR^'   IXSURAXXI'  201 

his  i)art  transmit  tlio  card  thus  stamped  to  the  Central  Of- 
fice. There  the  amount  so  forwarded  in  stamps  will  he 
placed  to  the  credit  of  the  beneficiary.  In  the  case  of  con- 
tributors, voluntary  or  compulsory,  who  are  not  members  of 
a  recognized  Friendly  Society,  the  insurer  pays  what  we  may 
call  his  premium  directly  to  the  post-office  and  gets  credit 
for  it  in  a  special  book,  which  of  course,  he  retains.  All 
amounts  so  paid  are,  as  in  the  former  case,  transmitted  to 
the  Central  Office  bj'^  the  postal  official. 

The  distribution  of  the  fund  will  be  accomplished  in  a 
corresponding  twofold  manner.  To  the  great  Friendly  So- 
cieties which  are  already  established  or  may  hereafter  be 
founded  in  accordance  with  the  provisions  of  the  bill  will  be 
assigned  the  distribution  of  benefit  funds  to  their  members. 
All  insurers  will  be  encouraged  to  join  such  societies.  For 
contributors,  whether  voluntary  or  compulsory,  who  are  not 
members  of  such  a  society  the  Government  will  set  up  a 
post-office  system  of  distribution  somewhat  similar  to  the 
system  at  present  used  for  the  payment  of  pensions  under 
the  Old  Age  Pensions  Act  of  1909.  Every  precaution  will 
be  taken  to  have  the  distribution  societies  perform  this  por- 
tion of  their  work  in  a  proper  manner.  Among  the  safe- 
guards provided  are  large  membership  (10,000  for  Great 
Britain,  5.000  for  Ireland),  non-division  of  funds  except  for 
benefits,  keeping  of  books  and  accounts.  Government  audit 
and  valuation,  the  giving  of  adequate  security  against  mal- 
versation or  misappropriation  of  funds  and  provision  of  ar- 
bitrators in  case  of  dispute.  Special  precautions  are  taken 
against  malingering.  To  aid  distribution  both  through  the 
Friendly  Societies  and  the  post-office,  Local  Health  com- 
mittees will  be  established,  and  these  committees  will  have 
charge  of  making  tiie  medical  arrangements  for  all  beneficiar- 
ies, and  of  carrying  on  educational  and  propaganda  work 
looking  toward  the  general  health  of  the  community. 

That  part  of  the  bill  which  deals  with  insurance  against 
unemployment  is  limited  for  the  present,  as  far  as  its  com- 
pulsory force  is  concerned,  to  those  trades  in  which  the  most 
serious  fluctuations  occur — namelv,  the  engineering  trade  and 


202  SELECTED  ARTICLES 

the  building  trade;  but  in  order  to  encourage  voluntary  in- 
surance against  unemployment  the  Board  of  Trade  is  em- 
powered to  pay  to  any  association  giving  unemployment 
benehts  a  subsidy  of  one  sixth  of  the  amount,  up  to  I2s.  a 
week  per  individual,  expended  on  such  benefit,  and  this  regu- 
lation applies  to  all  trades  and  all  employees. 

The  reasoning  by  which  the  Chancellor  of  the  Exchequer 
justified  the  principle  of  compulsory  unemployment  insur- 
ance is  that,  whoever  is  to  blame  for  the  great  cyclical, 
seasonal,  or  other  fluctuations  of  trade,  the  workman  is  the 
least  to  blame,  for  he  does  not  guide  or  gear  the  machine  of 
commerce  and  industry,  the  direction  and  the  speed  being 
left  almost  entirely  to  others.  The  Chancellor  limits  the 
operation  of  his  plan  for  the  time  being  to  the  two  selected 
trades,  because  he  recognizes  that,  for  want  of  actuarial 
data,  his  proposal  is  more  in  the  nature  of  an  experiment 
than  is  his  plan  for  sickness  insurance.  No  real  effort  has 
been  made  in  this  matter  of  unemployment  insurance  here- 
tofore in  the  United  Kingdom  except  by  the  trade  unions, 
and  in  their  case  it  applies  to  only  1,400.000  workers,  who 
form  but  a  fraction  of  the  industrial  population.  Other 
workers  cannot,  unaided,  afford  such  insurance;  and  even  in 
the  case  of  the  trade-unions  the  burden  sometimes  falls  so 
heavily  upon  them  that  it  is  almost  impossible  for  them  to 
bear  it.  This  is  one  of  the  justifications  put  forward  for 
the  above-mentioned  subsidy  to  assist  voluntary  insurance. 

The  basis  upon  which  the  compulsory  scheme  of  this  part 
of  the  bill  rests  is,  as  stated,  a  trade  basis.  The  Chancellor 
was  deterred  from  using  a  municipal  basis  or  a  national 
basis  by  a  consideration  of  the  many  failures  along  those 
lines  which  had  occurred  on  the  Continent.  By  compulsion, 
therefore,  within  the  trades  selected,  a  fund  is  to  be  raised 
for  the  purpose  of  relieving  distress  due  to  unemployment. 
The  levy  on  the  workman  will  be  2i/2d.  (5c.)  a  week,  on  the 
employer  2^d.  a  week  also,  and  i^d.  (2J/2C.)  will  be  the 
weekly  contribution  from  the  State.  If  an  einployer  chooses 
to  compound  and  pay  his  own  contribution  and  the  contri- 
bution   of   each   of   his   workmen   by   the   quarter,   he   will   in 


COMPULSORY  IXSURAN'CE  203 

that  case  efifect  a  considerable  saving  per  annum,  the  saving 
representing  6s.  8d.  ($1.60)  per  man,  or  the  difference  be- 
tween los.  6d.  ($2.60)  and  4s.  2d.  ($1),  and  being  effected 
by  the  employer's  appropriating  the  21/2(1.  weekly  for  each 
of  his  workmen.  In  big  concerns,  where  several  hundred 
men  are  employed,  this  is  an  important  feature.  It  is,  of 
course,  an  inducement  to  the  employer  to  keep  all  his  men 
working  all  the  time. 

The  plan,  as  at  present  outlined,  will  apply  to  2,421,000 
workmen,  1,100,000  from  the  building  trade  and  1,321,000 
from  the  engineering  trade.  Their  contributions  as  esti- 
mated will  come  to  £1,100,000  per  annum,  and  those  of  the 
employers  to  £900,000,  while  the  State  for  contributions 
and  administration  will  be  liable  to  about  £750,000  per  an- 
rium. 

The  benefits  to  an  unemployed  workman  during  his  period 
of  unemployment  of  not  more  than  fifteen  weeks  will  be  a 
weekly  payment  A'arying  from  6s.  to  7s.  No  payment  will 
be  made  to  a  workman  who  is  dismissed  for  misconduct  or 
who  is  out  of  employment  through  a  strike  or  a  lockout. 
Relief  will  be  given  only  for  unemployment  due  to  fluctua- 
tions of  trade. 

The  machinery  for  the  distribution  of  these  benefits  will 
be  the  existing  Labor  Exchanges  and  the  existing  trade- 
unions.  The  trade-uriion  will  pay  to  its  members  the  un- 
employed benefit,  but  the  Labor  Exchange  will  have  first  to 
report  on  the  case.  The  workman  who  is  unemployed  will 
have  first  to  notify  a  Labor  Exchange,  whose  officials  will 
investigate  the  genuineness  of  his  claim,  and  prevent  him 
from  getting  unemployed  pay  if  he  is  not  entitled  to  it,  and 
further  will  try  to  secure  him  employment  as  soon  as  may 
be.  If  he  refuses  a  job  offered  to  him,  an  impartial  court 
of  reference  will  decide  whether  he  is  justified  in  doing  so, 
or  not.  and  if  he  is  found  not  to  be  so  justified,  he  will  be 
ineligible  for  unemployment  pay.  There  is  no  pay  for  the 
first  week's  unemployment,  nor  for  more  than  fifteen  weeks 
in  the  year,  and  no  man  can  draw  more  than  one  week's  pay 
for  five  weeks'  contribution,  so  that  the  loafer  will  soon  drop 
•out. 


204  SELECTED  ARTICLES 

It  will  at  once  be  seen  that  the  traditional  British  respect 
for  the  liberty  of  the  subject  to  do  what  he  likes  with  his 
own  property  is  here  openly  and  avowedly  violated.  There 
is  in  a  sense  a  return  to  paternalism,  or  at  least  to  benevolent 
despotism:  as  you  punish  a  child  for  its  own  ultimate  good, 
so  you  tax  certain  people  for  their  own  contingent  benefit. 
Mr.  Lloyd-George's  defense  is  that  what  he  does  he  does  in 
the  public  interest.  It  is  a  good  thing,  he  argues,  for  the 
workman  to  be  insured  against  sickness  or  unemployment: 
therefore  let  him  pay.  It  is  a  good  thing  for  an  employer 
to  have  to  deal  with  a  hardy  and  healthy  race  of  efficient 
workers  instead  of  with  inefficient  weaklings:  therefore  let 
him  pay,  too.  It  is  a  good  thing  for  everybody  to  have  a 
healthy  and  contented  population:  therefore  let  everjbod}' 
pay,  directly  or  indirectly  for  so  great  a  boon.  In  essence, 
the  Chancellor  doubtless  further  argues,  it  is  just  as  defens- 
ible to  put  on  taxes  to  secure  a  well-doctored,  properly  med- 
icined  nation,  and  by  prevention  or  cure  of  sickness  to  re- 
duce the  bills  of  mortality  and  cut  down  the  ills  which 
liesh  is  heir  to.  as  to  raise  by  taxation  a  fund  to  build  and 
equip  Dreadnoughts  for  the  protection  of  British  trade.  His 
proposals  are  at  the  same  time  a  tribute  and  an  important 
addition  to  the  new  humanist  view  of  the  obligations  of  gov- 
ernment. 

It  will  be  noticed  how  important  are  the  functions  to  be 
exercised  under  this  bill  by  the  post-office,  the  Friendly  So- 
cities,  the  trade-imions,  the  Labor  Exchanges,  and  the 
Health  Committees.  The  post-office  has  gradually  grown 
to  be  the  great  general  utility  department  in  British  execu- 
tive government.  It  is  the  one  department  that  is  worked 
at  a  profit.  Its  activities  extend  not  only  to  the  mails,  but 
also  to  the  telegraphs,  telephones,  savings-banks,  life-insur- 
ance, annuities,  and  stock-broking  transactions;  its  aid  has 
also  been  invoked  and  obtained  for  the  Labor  Exchanges; 
and  now  its  elasticity  is  to  be  demonstrated  by  its  method 
of  handling  the  new  responsibilities  with  which  it  is  to  be 
intrusted.  For  the  first  time  the  Friendly  Societies  and  the 
trade-unions  are  to  be  called  in  as  allies  of  the  Government. 


COMPULSORY  IXSUR.WCE  203 

Many  dread  the  results  for  the  smaller  Friendly  Societies. 
With  regard  to  the  trade-unions  it  is  remarkable  that,  while 
some  labor  leaders  fear  their  efficiency  as  protectors  of  their 
members  will  be  impaired,  some  capitalists  dread  that  the 
public  funds  they  administer  may,  in  some  bafflingly  elu- 
sive manner,  be  made  to  supplj'^  contributions  to  the  war- 
chest  in  the  battle  between  capital  and  labor.  Neither  con- 
tingency, it  should  be  added,  is'apprehended  by  Mr.  Lloyd 
George. 

Survey.  27:  1306-12.  December  2,  191 1. 

Struggle  for  the  British   Health   Bill.     Randolph  J.   Brodsky. 

Aside  from  its  scope,  embracing  the  vast  majority  of  the 
working  population  of  the  British  Isles,  and  taking  in  not 
only  the  care  but  the  prevention  of  disease,  the  bill  is  pe- 
culiarly interesting  in  that  it  makes  skillful  use  of  existing 
English  agencies  together  with  new  administrative  institu- 
tions patterned  on  the  German  experience;  and  that  it  comes 
at  a  time  when  the  problems  of  poverty  and  industrial  stag- 
nation have  become  acute.  When  the  bill  was  introduced  in 
Parliament  last  May  by  Lloyd  George,  chancellor  of  the 
exchequer,  it  met  with  spontaneous  approval,  the  Opposi- 
tion uniting  with  the  Government  in  its  support.  Gradually, 
however,  the  full  significance  of  each  provision  became  clear 
to  the  various  interests  that  would  be  affected,  and  difficul- 
ties arose  for  adjustment.  Friendly  societies  which  main- 
tained cooperative  drug  stores  came  into  conflict  with  the 
pharmacists  who,  under  the  bill,  w^ere  given  the  right  to 
dispense  all  medicines.  The  hospitals  claimed  that  the  bill 
would  increase  their  cases  and  that  the  insurance  rates 
would  deprive  them  of  many  voluntary  contributions  from 
working  people  and  employers;  therefore  they  demanded 
state  payment  for  in-patients,  as  well  as  exemption  from 
payment  for  their  own  employes.  Householders  and  farm- 
ers alsq  demanded  exemption.  Suffragettes  and  represen- 
tatives of  working  women  complained  of  the  inferior  terms 
under  which  the  benefit  would  be  paid  to  women — in  return, 


2o6  SELECTED  ARTICLES       " 

it  is  true,  for  a  lower  contribution.  Insurance  companies 
operating  among  industrial  populations  and  fearing  that 
the  bill  might  cut  down  their  business  asked  to  participate 
in  the  insurance  system.  Small  societies  objected  to  the 
10,000  membership  limit  set  in  the  first  draft  of  the  bill. 
Employers  felt  that  the  whole  community  should  share  the 
burden.  Though  the  Labor  party  as  a  whole  supported  it,  a 
minority  in  that  body,  as  well  as  the  Dockers'  Union,  the 
Social  Democratic  Federation,  and  the  Anti-Sweating 
League,  opposed  the  contributory  features  and  the  treat- 
ment of  poorer  insurers  vigorously.  The  Irish  labor  unions 
contended,  as  a  matter  of  course,  for  home  rule. 

The  chancellor,  for  many  years  president  of  the  Board 
of  Trade  and  a  skilled  arbitrator,  mollified  these  and  many 
other  opponents.  A  greater  difficulty  was,  however,  en- 
countered in  satisfying  the  claims  of  doctors  and  friendly 
societies.  A  preliminary  review  of  the  Insurance  Bill  is 
essential  to  a  discussion  of  the  claims  of  the  critics,  particu- 
larly of  these  two  groups. 

Lloyd  George's  health  scheme,  which  was  framed  with 
the  co-operation  of  the  friendly  societies,  covers  sickness, 
invalidity,  and  maternity.  Out  of  a  total  wage-earning  popu- 
lation of  19,000,000,  14,000,000  persons  are  to  receive  its 
health  benefits  as  compulsory  insurers.  These  fourteen  mil- 
lions include  all  working  persons  under  sixty-five  years  who 
are  in  receipt  of  an  income  not  exceeding  $800  a  year,  with 
the  exception  of  those  working  on  their  own  account,  wives 
working  for  their  husbands,  casual  domestics  and  workers, 
commission  agents  working  for  more  than  one  employer, 
and  pensionable  government  employes.  Sailors  and  soldiers 
are  to  be  covered  by  a  special  fund.  In  addition  to  the  com- 
pulsory insurers,  special  provision  is  made  for  voluntary 
insurance,  which  will  probably  take  in  some  850,000  persons, 
the  majority  being  wives  of  compulsory  insurers.  On  her 
marriage  a  woman's  contributions  while  compulsory  insurer 
are  returned  to  her. 

Those  insured  under  the  compulsory  scheme  are  divided 
into   two    groups,    members   of   approved    societies    and   post 


COMrULSORY  INSURANCE  207 

office  or  deposit  contril)Utors.  Under  the  term  "approved 
society"  come  trade  unions,  clubs  formed  of  policy-holders 
of  industrial  insurance  corporations,  and  friendly  societies. 
These  approved  societies  must  be  self-governing  organiza- 
tions, not  on  a  profit-making  basis,  with  membership  large 
enough  to  secure  against  risk,  and  must  provide  medical 
treatment  and  money  benefits. 

Employers'  benefit  funds  are  allow^ed  in  this  group  under 
certain  conditions.  They  must,  how^ever,  be  in  a  position  to 
grant  the  minimum  benefit  for  the  statutory  contribution. 
Any  member  is,  however,  given  the  right  to  transfer  his 
subscription  and  his  employer's  share  with  it  to  any  ordinary 
society,  if  he  desires  to  do  so.  The  principle  of  self-govern- 
ment remains,  but  the  employer  is  allowed  one-fourth  rep- 
resentation in  the  management  of  the  society,  if  he  makes 
himself  responsible  for  the  solvency  of  the  fund.  The  re- 
quirement as'  to  a  minimum  number  of  members  is  not  ap- 
plied to  employers'  funds. 

It  has  been  estimated  that  12,000,000  persons,  or  86  per 
cent  of  the  insured,  would  be  members  of  approved  societies 
existing  or  created.  Those  who  do  not  wish  to  join  benefit 
societies  or  who  are  disqualified  for  membership  by  physical, 
mental,  or  moral  defects  constitute  the  post  office  or  deposit 
contributors.  This  class,  which  will  number  some  900,000 
persons — -14  per  cent  of  the  insured —  represents  low  risks, 
that  is,  high  morbidity  and  mortality  rates.  Special  precau- 
tions have  therefore  been  taken  against  possible  depletion 
of  the  treasury.  The  post  office  depositor  is  deprived  of  in- 
validity insurance.  His  waiting  period  for  the  sick  and  medi- 
cal benefit  is  prolonged  and  under  ordinary  conditions  the 
sick  benefit  he  is  allowed  to  draw  must  not  exceed  the 
amount  of  his  deposits.  Under  certain  conditions,  however, 
the  local  health  committees  who  administer  the  benefits  of 
this  group  of  insured  may,  with  the  consent  of  the  treasury 
or  the  local  authority,  enlarge  the  benefits  of  post  office  de- 
positors by  spending  more  money  than  the  actual  amount 
of  the  contributor's  deposit  upon  medical  treatment,  the 
treasury    and    local    authorities    each    defraying   one-half   the 


2o8  SELECTED  ARTICLES 

additional  expenditure.  The  arrangements  for  post  office 
contributors  are  tentative  for  three  years. 

The  minimum  sickness  benefit  obtained  for  these  contri- 
butions is  los.  a  week  for  men  and  7s.  6d.  for  women,  to 
begin  after  the  fourth  day  of  illness  and  continue  for  thir- 
teen weeks.  Those  paying  lower  than  46.  contributions  re- 
ceive correspondingly  lower  benefits.  If  illness  continues 
after  this  time  5s.  is  provided  for  the  following  thirteen 
weeks.  Invaliditj'  benefit  begins  at  the  twenty-seventh  week 
and  continues  at  the  rate  of  5s.  until  the  patient  is  eligible 
for  an  old-age  pension.  A  maternity  benefit  of  30s.  is  to 
be  paid  to  the  wives  of  insured  men  or  to  unmarried  mothers 
who  are  insured.  This  latter  benefit  will  be  paid  to  some- 
thing like  a  million  mothers  annually.  Besides  money  pay- 
ments the  insured  will  receive  free  medical  attendance  and 
medicine,  and  sanatorium  care  in  cases  of  tuberculosis  or 
certain  other  specified  diseases. 

A  comparison  of  the  English  with  the  German  system 
shows  the  English  bill  to  be  more  advantageous  to  the 
insured  in  that  the  workman  bears  a  smaller  proportion  of 
the  expense  and  has  the  entire  administration  of  the  funds. 
The  employer  bears  a  larger  share  of  the  financial  burden 
and  the  government  contributes  not  merely  as  in  Germany 
to  the  invalidity  fund  but  to  that  for  sickness  as  well.  The 
maternity  benefit  is  on  a  basis  far  wider  than  that  of  Ger- 
many, where  it  is  so  hedged  about  with  restrictions  as  to 
reach  comparatively  few.  The  estimated  annual  cost  of  this 
maternity  benefit  in  the  British  Isles  will  be  £1.500,000;  in 
Germany,  with  a  population  almost  half  again  as  large,  it  is 
onl}-    £300,000. 

The  cost  of  management  will  be  reduced  to  a  minimum  by 
the  method  of  collection  through  existing  approved  organi- 
zations. The  method  of  collecting  contributions,  the  most 
vital  part  of  a  compulsory  plan,  is  simple.  The  workman 
obtains  from  his  friendly  society  or  the  post  office  a  card 
issued  by  the  Insurance  Commissioner.  To  this  his  em- 
ployer attaches  each  week  stamps  to  the  amount  of  the 
workman's  and  his   own   contribution,  the  former  being  held 


COMPULSORY  IXSURANCE  209 

back  from  wages.  At  intervals  these  cards  are  cashed-in  to 
the  insurance  office  by  the  societies.  The  sums  paid  for 
stamps,  together  with  the  contribution  of  tlie  government, 
form  the  national  health  insure  fund.  The  greater  part  of 
this  fund  will,  on  the  plan  of  the  German  Sick  Funds,  which 
have  in  this  way  cut  down  their  sickness  rate,  be  invested  by 
the  National  Debt  Commisioner  in  loans  for  sanitary  hous- 
ing. The  friendly  societies  retain  the  right  to  invest  the 
workmen's  own  contributions. 

Sanitary  housing  is  one  side  of  the  health  campaign;  the 
general  work  of  preventing  and  caring  for  disease  is  the 
other.  This  is  entrusted  to  local  health  committees,  bodies 
which  will  supplement  the  work  of  already  existing  health 
authorities.  Their  special  functions  will  be  the  administra- 
tion of  the  funds  for  medical  care  and  sanitation  and  the 
conducting  of  an  educational  campaign.  More  important 
still,  they  will  have  the  power  to  demand  a  public  inquiry  in 
cases  of  excessive  local  sickness  due  to  neglect  of  public 
health,  factory,  or  housing  acts.  If  the  case  is  proved  against 
a  local  authority,  that  authority  will  have  to  reimburse  the 
insurance  fund  through  the  societies  or,  in  the  case  of  post 
office  contributors,  through  the  health  committee,  for  any 
expenses  it  has  incurred — reimbursing  itself  in  turn  from  the 
local  property  owner  at  fault,  if  the  fault  is  a  private  rather 
than  a  public  one.  This  system  will  mean  also  the  accumu- 
lation of  invaluable  records  of  public  health  and  the  auto- 
matic revelation  of  "black  spots"  to  be  cleaned  out. 

The  sphere  of  action,  the  powers,  and  the  influence  of  the 
local  health  committees  being  from  the  beginning  so  large, 
and  subject  to  such  indefinite  extension,  their  personnel  will 
be  of  immense  importance.  The  friendly  societies  and  the 
medical  profession  are  to  be  included,  besides  representa- 
tives of  county  or  borough  councils  and  the  post  office 
contributors.  General  supervision  of  the  insurance  system 
will  be  entrusted  to  a  Board  of  Insurance  Commissioners — 
with  a  central  office  in  London  and  branches  throughout  the 
country — aided  by  an  advisory  committee  of  representatives 
of     employers'     associations,     approved     societies — including 


210  SELECTED  ARTICLES 

trades  unions  as  a  balance  to  the  employers'  representatives — 
physicians,  and  other  experts  chosen  by  the  commission. 
Women  are  eligible  for  membership  in  all  committees. 
The  expenses  of  the  Board  of  Commissioners  will  be  met 
out  of  the  national  exchequer. 

Such  is  the  National  Insurance  Bill.  Some  idea  of  the 
number  of  its  critics  has  already  been  given.  It  has  been 
strongly  objected  to  both  in  principle  and  in  detail.  The 
basic  contributory  plan  has  been  attacked  by  the  group  of 
representatives  spoken  of  above,  who,  using  the  metaphor  of 
the  dog  who  fed  upon  its  own  tail,  claim  that  the  worker 
pays  both  his  own  and  (in  enhanced  price  as  consumer)  the 
employer's  contribution.  They  say  further  that  the  contrib- 
utory system  renders  the  insurance  almost  useless  to  the 
poorest  class  of  workers,  who  need  it  most,  and  who  receive 
back  only  what  they  give.  The  full  benefits  of  the  system 
go,  they  hold,  only  to  the  well-paid  workers,  who  need  them 
least.  Other  critics  object  to  the  total  exclusion  of  the  mar- 
ried woman  from  the  compulsory  plan.  Others  again  object 
to  the  age  limit  of  sixty-five  for  admission  to  the  system, 
which  leaves  an  interval  of  five  years  during  which  an  aged 
person  is  eligible  to  no  state  assistance.  This  latter  dif- 
ficulty, it  is  expected,  will  be  met  by  lowering  the  inferior 
limit  for  old  age  pensions  by  five  years.  Lack  of  funds  and 
difficulties  of  administration  will  make  it  necessary  to  deal 
with  the  other  problems  by  later  legislation.  The  believers 
in  the  bill  point  out  that  when  the  accrued  liability  due  to 
the  flat  rate  system  of  contribution  is  met,  large  sums  will 
be  released  for  extending  and  perfecting  the  system. 

After  this  period  of  debt  is  passed  the  plan  is  to  increase 
maternity,  sickness,  and  invalidity  benefits.  Besides  this  in- 
crease in  existing  benefits,  the  government  contemplates  add- 
ing new  ones,  such  as  free  medicine  for  dependents  and  a 
benevolent  fund  for  members  in  economic  distress,  and  ex- 
tending and  improving  the  whole  public  health  system,  so  as 
to  make  it  an  integral  part  of  the  Liberal  scheme  of  social 
legislation,  which  is  planned  to  cover  all  contingencies,  from 
accident  to  old  age,  that  befall  the  working  man. 


COMPULSORY  INSURANCE  211 

Two  serious  protestants  the  government  had  to  deal  with. 
Both  are  essential  parts  of  the  mechanism  of  the  national 
insurance  system:  the  friendly  society  because  the  whole 
work  of  organization  and  management  of  sick  benefit  is  left 
in  its  hands;  the  medical  profession  because  it  is  called  upon 
as  part  of  a  public  scheme  to  administer  medical  treatment 
to  some  14,000,000  people.  How  important  complete  har- 
mony and  close  co-operation  between  these  two  elements  is, 
is  shown  by  the  German  experience,  where  their  quarrels 
have  seriously  handicapped  the  system.  From  the  very  in- 
troduction of  the  English  bill  fears  were  entertained  of  a 
possible  collision,  and,  when  the  clash  actually  occurred,  the 
excitement  was  communicated  to  the  general  public,  which 
watched  with  curiosity  the  struggle  between  common  friend- 
ly society  man  and  "gentleman"  doctor.  Under  the  bill  the 
friendly  society  or  trade  union  is  promised  state  aid,  is 
guaranteed  a  steady  and  increased  business  through  a  com- 
pulsory plan  that  will  give  it  stability  and  permanence.  It 
is  presented  with  a  reserve  fund  and,  if  it  already  possesses 
reserves  of  its  own,  it  will  be  enabled  to  reduce  contributions 
for  the  same  benefits  or  increase  benefits  for  the  same  sub- 
scriptions. It  will  prosper,  but  at  the  price  of  partial  re- 
nunciation of  the  self-government  principle  and  certain  other 
privileges.  From  now  on  the  government  will  stand  between 
the  friendly  society  and  the  individual  member;  from  now  on 
the  friendly  society  becomes  an  "approved"  society;  it  sub- 
mits itself  to  the  supervision,  regulation,  restriction,  and 
reorganization  desired  by  the  government.  From  now  on 
it  will  be  obliged  to  make  regular  valuation  of  its  assets  and 
liabilities  and  will  be  restricted  in  its  right  of  investing  its 
sickness  benefit  funds.  None  of  the  friendly  society  activi- 
ties except  these  sickness  funds  will,  however,  be  affected. 
In  respect  to  one  form  of  society,  the  trade  unions,  it  is 
estimated  that  the  insurance  will  mean  a  donation  of  some 
$12,000,000.  At  the  publication  of  the  bill  the  friendly  socie- 
ties showed  a  rather  sympathetic  attitude  toward  it.  They 
became,  however,  more  reserved  when  Parliament,  under  the 
pressure  of  the  insurance  interests  represented  by  the  eighty 


212  SELECTED  ARTICLES 

directors  of  insurance  companies  who  sit  in  the  lower  house, 
extended  the  definition  of  approved  society  so  as  to  include 
in  the  scheme  the  industrial  insurance  companies  and  col- 
lecting societies,  and  permitted  them  to  form  sick  clubs  of 
their  policy-holders.  These  profit-making  institutions  the 
friendly  societies  viewed  as  dangerous  and  unfair  competi- 
tors. They  feared  that  industrial  corporations,  with  their 
hordes  of  paid  agents  and  solicitors,  would  soon  crowd  them 
out;  that  high  officials  and  agents,  and  not  the  policy-hold- 
ers, would  administer  the  business;  that  there  would  be  an 
end  of  the  self-government  principle  guaranteed  by  the  bill. 

Finally,  when  Parliament,  persuaded  by  the  interests  rep- 
resented by  the  British  Medical  Association,  made  changes 
in  the  bill  that  deprived  the  friendly  societies  by  the  stroke 
of  a  line  of  the  power  of  making  their  own  arrangements 
to  secure  efficient  medical  treatment  and  transferred  this 
power  to  the  local  health  committee,  they  began  to  manifest 
a  feeling  of  hostility  toward  the  bill  and  of  distrust  towards 
its  framer.  They  saw  themselves  with  their  traditions  of 
self-government,  mutual  help,  and  social  intercourse  in  un- 
equal competition  with  the  insurance  companies'  sick  clubs, 
in  no  sense  democratic  but  governed  by  the  company  of- 
ficials; and  they  saw  their  whole  medical  system  passing  out 
of  their  hands  into  those  of  the  doctors  and  the  health  com- 
mittees. The  additional  money  advantage  to  their  members 
did  not  balance  the  danger  to  their  social  and  democratic 
traditions.  At  a  special  convention  of  the  National  Confer- 
ence of  Friendl)"  Societies,  they  formulated  a  series  of  mini- 
mum demands  and  sent  an  ultimatum  to  the  chancellor  to 
the  effect  that  unless  their  demands  were  granted  they  would 
repudiate  the  bill  and  refuse  the  administration  of  the  act. 
Among  these  demands,  the  restitution  of  their  control  over 
the  medical  treatment  of  their  members  occupies  the  most 
prominent  place;  and  on  this  issue — "the  free  choice  of  a 
doctor" — the  battle  was  concentrated  for  several  months.  So 
much  for  the  Friendly  Societies'  side. 

In  transferring  the  administration  of  medical  benefit  from 
the  approved  society  to  local   healtli   committees.   Parliament 


COMPULSORY  INSURANCE  213 

expressed  its  belief  in  the  principle  of  individual  choice  of  a 
doctor.  It  decided  that,  in  the  interest  of  the  individual 
member  who  may  become  ill,  from  considerations  of  efficient 
and  economical  administration  and  general  health,  it  is  de- 
sirable that  the  whole  question  of  medical  benefit  should  be 
turned  over  to  local  health  committees.  The  later  will  main- 
tain an  approved  local  list  of  doctors  whom  the  local  con- 
tributors may  freely  choose  instead  of  being  forced  to  use 
the  "club"  doctor  employed  on  contract  by  the  friendly  so- 
ciety or  pay,  in  addition  to  their  dues,  for  a  physician  of 
their  own  choice.  The  class  of  "soft"  doctors,  wjio  are  will- 
ing to  give  certificates  to  malingers  and  cause  the  depletion 
of  the  society  treasury,  can  be  held  in  check,  the  adherents  of 
this  plan  maintain,  by  their  own  profession,  which  will  pro- 
tect itself  and  the  scheme  by  organizing  watch  committees. 
The  daily  experience  of  club  treatment  shows  that  the  mem- 
bers often  do  not  take  advantage  of  the  right  to  the  attend- 
ance of  the  club  doctor,  but  prefer  to  pay  for  a  doctor  of 
their  own  choice. 

The  doctors'  side  of  the  question  remains  to  be  consid- 
ered. Doctors  have  hitherto  accepted  contract  practice,  with 
friendly  and  other  societies,  partly  in  order  to  get  a  start  in 
life,  partly  to  obtain  experience,  and  often  because,  although 
in  good  practice,  they  were  willing  to  do  the  work  from  al- 
truistic motives.  In  many  places,  indeed  there  has  been  no 
"doctor  difficulty,"  the  friendly  societies  treating  the  doctors 
reasonably  and  considerately.  But  under  a  scheme  nation- 
wide in  application  the  doctors  were  faced  with  the  proposi- 
tion that  an  engrossing  share  of  their  practice  would  become 
contract  practice  at  a  rate  of  pay  which  they  held  would  be 
unremunerative.  If  the  greater  part  of  a  physician's  prac- 
tice was  to  be  turned  into  club  practice,  they  claimed  that 
a  much  higher  rate  per  head  would  have  to  be  charged.  The 
chancellor  agreed  to  fix  this  rate  at  6s.  per  capita,  without 
the  medicine,  as  against  the  5s.,  4s.,  and  even  3s.  contract 
doctors  have  been  accustomed  to  receive  from  friendly  so- 
cieties. 

The   final   question   at  issue   between   doctors  and   friendly 


214  SELECTED  ARTICLES 

societies  was  the  control  of  the  local  health  committees,  and 
to  their  demand  for  a  majority  on  these  bodies  the  societies 
were  determined  not  to  yield.  In  this  fight  the  Opposition, 
the  Conservative  party,  took  the  part  of  the  societies.  Afraid, 
to  the  minds  of  the  Liberals,  to  attack  the  bill  openly,  and 
at  the  same  time  fully  conscious  of  the  fact  that,  if  passed,  it 
would  establish  a  monument  to  the  present  Government,  the 
Conservatives  deemed  this  the  proper  moment  to  retard  the 
progress  of  the  bill.  "Willing  to  wound,  but  afraid  to  strike," 
they,  in  the  words  of  Lloyd  George,  "gave  a  yap  and  then 
said  to  friendly  societies  and  trade  unions,  'You  go  at  it.'  " 
Their  press  recorded  painstakingly  the  slightest  manifesta- 
tions of  dissatisfaction — "revolt,"  they  called  it — from  friend- 
ly society,  labor  man,  socialist,  suffragette,  hospital  officer,  or 
private  individual.  They  dwelt  upon  the  unpopularity  of  the 
bill,  the  complexity  of  the  situation,  the  inadequacy  and  un- 
ripeness of  the  bill,  and  finally  went  so  far  as  to  urge  its 
withdrawal.  Disappointed  that  the  old-age  pension  bill 
stood  to  the  credit  of  the  Liberal  government,  they  sought 
to  block  further  social  legislation  by  the  party  in  power. 
For  a  time,  this  taking  the  bill  into  politics  seriously  endan- 
gered it,  but  gradually  the  situation  cleared.  The  election 
results  in  Kilmarnock,  where  the  campaign  was  conducted 
and  won  on  the  issue  of  the  insurance  bill,  brought  some  re- 
lief and  encouragement  in  Government  circles,  as  did  the 
eflfect  on  the  public  of  Lloyd  George's  speech  on  the  bill  at 
Whitefield's  Tabernacle  on  October  14.  In  this  address  Mr. 
Lloyd  George  presented  the  strong  features  of  the  bill,  re- 
vealed the  intrigues  and  the  misrepresentations  of  the  Oppo- 
sition, and  carried  with  him  the  audience  and  the  general 
public  by  the  declaration,  "I  will  fight  through  or  fall."  To 
clinch  this  victory  there  appeared  at  this  time  a  Report  on 
Trade  Unions  Under  the  Scheme,  prepared  by  an  actuary  of 
national  standing,  on  behalf  of  organized  labor,  which  point- 
ed out,  to  the  surprise  of  the  labor  unions  themselves,  that 
they  would  derive  great  advantages  from  the  act.  Soon 
after  Ramsay  MacDonald,  M.  P.,  chairman  of  the  Labor 
party,  made  a  public  statement  to  the  effect  that  the  Labor 


COMPULSORY  INSURANCE  215 

party  had  passed  a  resolution  in  support  of  the  insurance 
bill.  He  promised  that  all  his  influence  would  be  used  to 
aid  its  passage  and  stated  that  opinions  contrary  to  the  bill 
were  held  by  but  two  or  three  members  of  the  party.  In 
the  meantime  the  chancellor  was  using  his  influence  to  bring 
the  two  chief  conflicting  interests  to  terms.  He  brought  the 
friendly  societies  to  the  point  of  attending  joint  meetings 
with  representatives  of  the  medical  profession,  at  which  both 
sides  made  some  concessions.  On  October  19  a  great  meet- 
ing of  all  friendly  societies  was  held,  at  which  the  leaders 
surprised  the  audience  by  announcing  that  the  chancellor  of 
the  exchequer  had  conceded  nine  out  of  their  original  eleven 
demands,  and  by  moving  a  resolution  in  support  of  the  bill, 
which  was  carried.  The  important  concessions  were:  the 
right  of  investing  their  own  funds;  the  right  of  self-govern- 
ment for  the  sick  clubs  of  insurance  companies;  and,  most 
important  of  all,  the  right  to  appoint  the  majority  of  repre- 
sentatives on  local  health  committees. 


Survey.  24:  136-9.  April  23,  1910. 

Accident  Relief  of  the  U.  S.  Steel  Corporation. 

The  United  States  Steel  Corporation  has  announced  a 
plan  for  relief  of  men  injured  and  the  families  of  men  killed 
in  work  accidents.  The  plan  is  a  distinct  advance  over  any 
existing  s\-stem  of  relief  carried  out  under  any  of  the  consti- 
tuent companies;  it  puts  all  the  employes  of  the  biggest  pay- 
roll in  America — 225,000  men — on  the  same  footing,  and  it 
establishes  a  system  which  can  be  adjusted  to  the  new  legis- 
lation that  will  probably  be  enacted  in  the  next  ten  years  in 
the  different  states  in  which  the  corporation  operates. 

In  more  ways  than  one,  then,  the  new  plan,  which  will  go 
into  effect  May  i  for  an  experimental  year,  is  a  step  in  ad- 
vance. The  exact  provisions  are  published  below.  While 
some  of  them  do  not  measure  up  to  the  proposals  made  by 
the  various  state  commissions  which  have  been  considering 
the  subject,  manj'  of  them  are  a  radical  departure  from  con- 


2i6  '  SELECTED  ARTICLES 

temporary  practice,  and  as  a  voluntary  act  show  both  fore- 
sight and  liberality.  The  plan  disregards  the  idea  of  negli- 
gence entirely  and  may  be  said  to  recognize  that  a  share  of 
the  income  loss  due  to  work  accidents  should  be  a  charge  on 
the  industry;  it  covers  hazardous  and  non -dangerous  em- 
ployments alike;  it  puts  the  entire  cost  of  the  plan  on  the 
business  without  any  contribution  whatsoever  from  the  men. 
No  relief  will  be  paid  if  suit  is  brought.  It  naturally  re- 
quires a  release  from  legal  liability  upon  payment  of  the  re- 
lief, but  it  avoids  the  involved  and  questionable  relationships 
created  by  such  relief  associations  as,  for  instance,  the  Penn- 
sylvania Railroad  Relief  Department  to  which,  like  a  mutual 
insurance  association,  the  employes  pay  dues,  and  from  which 
they  can  receive  no  benehts  from  their  dues  until  they  sign 
a  paper  releasing  the  company  from  any  legal  liability. 

The  Steel  Corporation  makes  a  point  in  its  announcement 
that  the  payments  it  proposes  are  "for  relief  and  not  as 
compensation."  "There  can  be  no  real  compensation  for 
permanent  injuries,  and  the  notion  of  compensation  is  neces- 
sarily based  on  legal  liability  which  is  entirely  disregarded  in 
this  plan  as  all  men  are  to  receive  the  relief,  even  though 
there  be  no  legal  liability  to  pay  them  anything.  .  .  ."  In 
line  with  this  position,  there  are  no  death  benefits  for  single 
men  and  extremely  low  disability  benefits  for  them.  Large 
numbers  of  immigrant  laborers  fall  in  this  class.  Moreover, 
in  death  cases  the  wording  of  paragraph  24  specifies  that 
relief  will  be  granted  "married  men  living  with  their  fami- 
lies." This  would  exclude  the  non-resident  families  of 
aliens,  unless  the  manager  of  the  relief  sees  fit  to  exercise 
his  discretionary  power  in  their  favor.  But  it  is  under- 
stood that  wide  .  latitude  has  been  left  the  companx' 
managers  in  cases  where  single  men  have  old  people  or 
others  demonstrably  dependent  upon  them.  The  death  bene- 
fit for  a  married  man  is  eighteen  months'  wages  and  this  is 
increased  ten  per  cent  for  every  child  under  sixteen;  an 
adjustment  of  relief  to  need  which  is  noteworthy.  The  plan 
includes  medical  and  hospital  treatment.  It  is  a  statement 
of  a  consistent  policy  which  will  give  the  man  who  goes  to 


COMPULSORY  INSURANCE  217 

his  work  in  the  morning  a  fair  knowledge  as  to  what  will 
happen  in  case  he  is  killed.  Much  of  tlie  ill  name  of  claim 
departments  in  all  industries  in  years  past  has  been  due  to 
the  incentive  to  claim  agents  to  "make  a  good  showing"  by 
keeping  down  awards.     Here  definite  standards  are  set. 

The  most  serious  question  raised  by  a  first  reading  of 
the  prospectus  of  the'  plan  is  as  to  the  sufficiency  of  the 
benefits  provided.  In  comparison  with  the  three  years' 
wages,  which  is  the  death  benefit  under  the  English  system, 
and  the  four  years'  wages  proposed  by  the  New  York  State 
Commission,  the  Steel  Corporation  announces  eighteen 
months'  wages  for  a  married  man  in  case  of-  death.  By  a 
sliding  scale  this  is  increased  with  an  increased  number  of 
children  and  with  length  of  service  in  the  company.  Yet 
the  family  of  an  employe  of  ten  years'  standing  with  five 
children  would  still  get  but  two  and  one-half  years'  wages. 
If  such  a  man  were  temporarily  disabled,  however,  he  would 
get  eighty-five  per  cent  of  his  weekly  wages  as  against  the 
flat  rate  of  fifty  per  cent  for  all  disabled  men  under  the  New 
York  bill.  The  highest  injury  benefit  specified  in  the  Steel 
Corporation's  announcement  is  for  the  loss  of  an  arm — eigh- 
teen months'  wages.  The  highest  benefit  for  permanent  dis- 
ibility  under  the  proposed  New  York  state  law  is  half  wages 
for  eight  years;  that  under  the  English  law  is  half  wages  for 
life.  But  here  again  the  discretion  of  the  company  managers 
enters  in,  and  in  the  case  of  loss  of  both  limbs  or  other 
more  complete  permanent  disability,  larger  amounts  would 
doubtless  be  paid.  At  several  important  points,  therefore, 
the  plan  is  flexible  and  results  will  be  dependent  upon  the 
spirit  in  which  the  company  managers  carry  out  its  provi- 
sions. It  would  be  impossible  to  forecast  these  practical 
workings  of  the  plan  until  after  it  has  had  at  least  the  year's 
trial  and  until  detailed  statements  are  available  as  to  the 
nature  of  injuries  and  actual  benefits  paid.  The  minimum 
provisions  for  death  in  the  case  of  married  men  are  in  them- 
selves higher  than  were  the  average  benefits  paid  by  any 
large  employer  in  the  steel  district  the  year  of  the  Pitts- 
burgh Survey. 


2i8  SELECTED  ARTICLES 

Nor  is  it  likely  that  the  Steel  Corporation  will  know 
either  the  cost  of  the  new  policy  or  its  acceptability  to  its 
employes  earlier  than  after  such  a  probationary  year.  The 
corporation  has  been  able  in  the  past  to  settle  most  cases 
out  of  court,  yet  the  new  plan  may  effect  economies  in 
gathering  legal  evidence,  etc.  Such  a  large  plan  of  relief 
would  scarcely  have  been  attempted  were  it  not  for  the 
energetic  measures  to  lessen  accidents  which  have  been  car- 
ried out  in  the  plants  of  the  constituent  companies  during 
the  last  two  years.  From  the  managers'  standpoint,  the  plan 
has  merit  in  its  probable  attraction  to  the  men — a  consider- 
able point  in  keeping  intact  a  non-union  working  force.  From 
the  public  standpoint  it  is  widely  significant  that  the  operat- 
ing corporation,  which  has  probably  the  largest  accident  ex- 
perience in  America  upon  which  to  base  its  plan,  and  which 
has  spent  a  million  dollars  a  year  on  accident  payments  in 
the  past,  should  adopt  a  plan  which  it  describes  as  "similar 
in  principle  to  the  German  and  other  foreign  laws  and  to 
recommendations  which  have  been  made  by  employers'  lia- 
bility commissions  in  New  York  and  other  states  since  our 
work  upon  this  plan  was  begun  (December,  1908)." 

Quarterly  Journal   of  Economics.   24:   714-42.   August,    1910. 

Old   Age   Pension   Schemes :    a   Criticism   and   a   Program. 

F.  Spencer  Baldwin. 

The  establishment  of  old  age  pension  systems  in  many 
states  is  a  striking  phase  of  the  growth  of  social  legisla- 
tion during  the  last  two  decades.  Germany  led  the  way  in 
1889,  with  the  first  old  age  and  invalidity  insurance  law. 
Denmark  instituted  a  system  of  old  age  out-door  relief  in 
1891.  Next,  three  of  the  Australasian  colonies  of  Great 
Britain  established  old  age  pension  systems, — New  Zea- 
land in  1898,  New  South  Wales  in  1900,  and  Victoria  in 
1901.  Meanwhile  Belgium  had  adopted  a  system  of  old  age 
insurance  and  pensions  in  igoo.  France  and  Italy  also 
later  introduced  special  measures  of  old  age  relief,  modeled 


COMPULSORY  INSURANCE  219 

after  the  Belgian  system.  In  1908  the  Commonwealth  of 
Australia  enacted  an  invalidity  and  old  age  pension  measure 
to  go  into  efifect  July  i,  1909;  the  Canadian  parliament 
passed  a  law  providing  for  the  issue  of  government  annui- 
ties ;  and  England  adopted  the  old  age  pension  act  to  go 
into  efifect  January  i,  1909.  The  French  senate  has  re- 
cently passed  a  measure  of  obligatory  and  contributory  old 
age  insurance.  Projects  of  legislation  with  reference  to 
this  question  have  been  under  parliamentary  consideration 
in  Austria,   Norway,  and   other   European   states. 

This  widespread  movement  has  been  prompted  by  mixed 
motives;  humanitarian  and  economic  -considerations  have 
worked  together  in  its  support.  The  former  were  upper- 
most in  the  minds  of  the  pioneers  of  the  movement.  The 
men  who  first  directed  public  attention  to  the  problem  of 
old  age  provision  in  England,  about  a  generation  ago,  were 
philanthropists  who  desired  to  reduce  the  volume  of  human 
misery.  They  were  shocked  by  the  extent  of  old  age 
pauperism.  They  proposed  that  a  pension  system  be  estab- 
lished as  a  means  of  taking  aged  workers  out  of  the  alms- 
houses and  enabling  them  to  spend  their  last  years  in 
self-respecting  comfort.  Later,  the  humanitarian  motive 
was  reinforced  by  economic  considerations.  The  changing 
conditions  of  economic  life  forced  the  problem  of  indus- 
trial superannuation  upon  the  attention  of  employers.  The 
increasing  use  of  machinery  and  the  growing  stress  of 
competition  demanded  the  retirement  of  workers  at  an 
earlier  age.  Employers  have  come  to  recognize  that  the 
aged  worker  is  a  burden  on  industry;  his  retention  in  active 
employment  after  he  has  passed  the  limit  of  his  efficiency 
means  economic  waste.  The  establishment  of  pension  sys- 
tems has,  therefore,  been  proposed  as  a  means  of  retiring 
employees  at  a  reasonably  early  age  and  removing  this 
handicap    on    industry. 

The  various  plans  for  the  solution  of  the  problem  of 
old  age  support  which  have  been  tried  or  proposed  involve 
widely  different  principles  and  methods.  The  first  issue 
that  arises  in  passing  upon  principles  and  methods  of  solu- 


220  SELECTED  ARTICLES 

tion  is,  should  the  plan  be  contributory  or  non-contributory? 
That  is  should  the  expense  be  borne  in  whole  or  in  part  by 
the  beneficiaries,  in  the  form  of  contributions  to  pension 
or  insurance  funds,  or  should  the  cost  be  defrayed  entirelj' 
by  the  State,  through  general  taxation?  If  the  contributory 
principle  be  chosen,  then  the  further  question  arises,  should 
participation  in  the  plan  be  compulsory  or  voluntary?  That 
is,  should  individuals  be  left  entirely  free  to  take  advantage 
of  the  system  of  pensions  or  insurance  provided,  or  should 
they  be  compiled  to  participate  in  the  scheme?  If,  how- 
ever, the  non-contributory  principle  be  chosen,  the  matter 
of  compulsion  beconjes  irrelevant,  l:)ecause  it  is  evident 
that  every  one  who  really  needed  such  aid  would  apply  for 
a  pension  under  any  non-contributory  system.  Finally, 
whether  the  plan  be  contributory  or  non-contributory,  this 
further  question  comes  up  for  consideration,  should  the  in- 
surance or  pension  scheme  be  universal  or  partial?  That 
is.  should  the  benefits  be  extended  to  all  without  restric- 
tion, or  should  they  be  confined  to  those  who  meet  specified 
conditions    of   eligibilit)'? 

Proceeding  further  with  the  analysis — from  principles  to 
measures — we  may  group  the  various  plans  of  old  age 
pensions,   insurance,    or   annuities   under   six   main   types: 

(i)  Universal  N on-contributory  Pension  Schemes.  This 
type  of  scheme  is  associated  with  the  names  of  Charles 
Booth  of  London  and  the  late  Edward  Everett  Hale  of 
Boston — the  most  prominent  advocates  of  universal  non- 
contributory  pensions.  The  scheme  of  Mr.  Booth  calls 
for  the  grant  of  a  pension  of  /S.  a  week  to  every  person 
70  years  of  age  and  over.  Mr.  Booth  would  exclude  aliens, 
and  possibly  other  ineligibles,  from  the  benefits  of  the 
pension  system,  but  remarks  that  it  is  unnecessary  to  bur- 
den the  statement  of  his  scheme  with  these  details.  Practi- 
cally, the  plan  is  universal  in  its  application,  and  -is  wholly 
non-contributory.  Any  person  claiming  to  be  70  years 
of  age  and  entitled  to  a  pension  would  take  out  an  appli- 
cation. If  the  application  were  allowed,  the  pensioner  would 
then    be   provided   with    a   certificate   of   identity   and   a   pen- 


COMPULSORY  INSURANCE  221 

sion  book,  which  would  enable  him  to  draw  his  allowance 
weekly  at  a  local  post  office.  The  plan  proposed  by  the 
late  Edward  Everett  Hale  was  similar  to  that  of  Mr.  Booth. 
Every  citizen,  man  and  woman,  over  69  years  of  age  was 
to  be  paid  a  pension  of  $100  a  year.  The  cost  of  this 
scheme  was  to  be  met  out  of  the  proceeds  of  a  State  poll 
tax.  It  was  Dr.  Hale's  opinion  that,  if  the  expense  of  a 
pension  scheme  were  provided  for  in  this  way,  the  citizens 
who  paid  a  poll  tax  would  feel  no  discredit  attaching  to  the 
receipt  of  a  pension,  since  they  would  themselves  provide 
the  funds  out  of  which  the  pensions  would  be  paid. 

(2)  Partial  Non-contributory  Schemes.  This  type  of 
scheme  is  embodied  in  the  old  age  pension  acts  of  Great 
PJritain  and  Australia.  The  application  of  the  British  and 
Australian  systems  of  old  age  pensions  is  restricted  to 
the  deserving  aged  poor.  The  British  act  provides  for  the 
payment  of  pensions,  not  exceeding  5s.  weekly,  to  persons 
70  years  of  age  and  over,  but  excludes  from  the  benefits 
of  the  scheme  the  following  classes:  persons  who  have 
lived  in  the  United  Kingdom  less  than  25  years;  persons 
whose  yearly  incomes  exceed  £31  los. ;  persons  in  receipt 
of  poor  relief;  persons  who  have  failed  to  work  accord- 
ing to  their  ability  to  maintain  themselves  and  their  de- 
pendents; inmates  of  lunatic  asylums;  and  persons  con- 
victed of  a  prison  offence.  The  scheme  is  wholly  non- 
contributory,  the  expenses  being  paid  out  of  "money  pro- 
vided by  Parliament."  The  Australian  system  is  similar 
in  principle  to  the  British  plan,  the  main  differences  being 
that  the  pensionable  age  is  lower,  namely,  65  years,  and 
that  the  amount  of  the  pension  is  larger,  namely,  los.  per 
week. 

(3)  Canipitlsory  Contributory  Insurance.  zvitlt  State 
Subsidy.  This  is  the  well-known  German  system.  The 
insurance  is  compulsory  on  all  wage-earners,  and  on  sal- 
aried persons  whose  yearly  income  does  not  exceed  2000 
marks.  The  scheme  is  founded  on  the  principle  of  obliga- 
tory insurance  for  working  people,  with  assistance  by 
employer   and    State.      Participation   in   the   plan   begins   with 


222  SELECTED  ARTICLES 

the  completed  sixteenth  year.  The  pension  is  paid  at 
the  age  of  70.  The  contributions  by  the  insured  are  graded 
according  to  the  amount  of  wages  or  salary  in  each  case. 
The  contribution  is  divided  equally  between  the  employer 
and  the  employed.  The  State  pays  the  expenses  of  ad- 
ministration, and  in  addition  contributes  to  each  pension 
a  fixed  sum.  This  method  of  dividing  the  burden  works 
out  in  practice  so  that  one-third  of  the  total  expense  is 
borne  by  the  State,  by  employers,  and  by  employed  re- 
spectively. The  amount  of  the  pension  is  small,  the  maxi- 
mum allowance  not  exceeding  $60  per  year. 

(4)  Voluntary  Contribittory  Insurance,  zvitli  State 
Subsidy.  This  is  the  plan  embodied  in  the  Belgian  old 
age  pension  act.  It  is  a  scheme  for  subsidizing  thrift  by 
means  of  a  state  contribution  to  insurance  funds  provided 
through  individual  savings.  The  object  is  to  put  a  pre- 
mium on  saving  for  old  age.  Participation  in  the  scheme 
is  optional.  The  pension  is  payable  at  the  age  of  60; 
the  amount  is  $72.  The  plan  is  administered  through  a 
superannuation  fund  bank,  maintained  by  the  state.  Citi- 
zens may  insure  themselves,  making  contributions  to  this 
bank;  the  State  then  pays  a  bonus  or  premium  on  the 
amount  contributed  by  the  individual.  This  scheme  of  as- 
sisted insurance  is  supplemented  in  Belgium,  it  should  be 
added,   by   a   system   of  non-contributory  pensions. 

(5)  Annuity  Schemes  under  Public  Adrninistration.  This 
type  of  scheme  has  been  adopted  in  Massachusetts  through 
the  savings  bank  insurance  act  of  1907,  and  in  Canada 
through  the  government  annuities  act  of  1908.  The  underly- 
ing principle  of  these  two  measures  is  essentially  the  same. 
They  provide  for  the  sale  of  insurance  or  annuities  at  low 
rates,  under  a  governmental  guarantee.  In  the  Canadian 
scheme  the  sales  are  made  directly  through  a  govern- 
mental department;  in  the  Massachusetts  scheme,  indi- 
rectly through  the  medium  of  the  savings  banks.  The  sys- 
tem differs  from  the  Belgian  plan  of  voluntary  contributory 
insurance,  in  that  the  State  pays  no  direct  subsidy  to 
the    insurance    funds.     There    is,    however,    a    small    subsidy 


COMPULSORY  INSURANCE  223 

by  the  State,  in  the  form  of  the  expenses  of  administra- 
tion. The  maximum  amount  of  the  annuity  in  Canada  is 
$600,  the  minimum  $50;  in  Massachusetts  the  insurance  is 
limited  to  $500,  and  the  annuity  to  $200.  Opportunity  is 
afforded  to  employers  to  co-operate  with  their  working 
people  in  providing  insurance  or  annuities,  by  making  con- 
tributions toward  the  payment  of  premiums  or  assisting 
in    the    collection    of    the    latter. 

(6)  Voluntary  Insurance  under  Private  Management. 
This  method  of  dealing  with  the  pension  and  insurance 
question  is  illustrated  by  the  industrial  insurance  offered 
by  private  insurance  companies,  and  the  retirement  and 
pension  systems  established  by  employers  of  labor.  No 
state  action  is  involved  here,  except  in  the  form  of  super- 
vision. In  case  of  the  schemes  established  by  employers, 
each  industrial  group  provides  for  its  own  insurance 
through  a  contributory  or  non-contributory  scheme.  The 
great  majority  of  these  private  pension  systems  are  based 
on  the  non-contributory  principle.  Industrial  insurance  is 
a  business  proposition,  pure  and  simple;  it  represents  pri- 
vate enterprise  applied  to  the  solution  of  the  problem  of 
old  age  insurance. 

The  untried  scheme  of  universal  non-contributory  pen- 
sions may  be  dismissed  from  further  consideration.  The  enor- 
mous expense  is  generally  recognized  as  prohibitive,  even 
tho  the  plan  itself  were  otherwise  unobjectionable.  Aside 
from  financial  considerations,  the  demoralizing  effect  of 
pensioning  indiscriminately  the  thrifty  and  the  thriftless, 
the  deserving  and  the  undeserving,  the  needy  and  the  well- 
to-do  is   an   absolutely  conclusive  objection  fo  the  plan. 

So  far  as  existing  measures  of  legislation  are  concerned, 
the  issue  lies  between  (i)  partial  non-contributory  pensions, 
(2)  universal  compulsory  insurance,  and  (3)  voluntary  an- 
nuity schemes.  In  general,  this  issue  should  be  determin- 
ed especially  with  reference  to  the  effects  of  the  different 
systems  upon  the  rate  of  wages,  upon  the  character  and 
efficiency  of  the  individual,  and  upon  the  status  of  the 
family.  It  is  obvious  that  any  plan  of  state  aid  which  tends 


224  SELECTED  ARTICLES 

to  depress  wages,  to  weaken  character  and  efficiency,  or  l<. 
disintegrate  the  family,  must  be  condemmed  as  socially  in- 
jurious. 

(i)  The  British  old  age  pension  system  has  not  been 
in  operation  long  enough  to  afiford  much  evidence  regarding 
the  social  effects  of  this  type  of  scheme.  The  Australasian 
legislation,  also,  is  of  comparatively  recent  origin.  The  only 
important  conclusion  that  can  be  drawn  from  the  short 
experience  with  partial  non-contributory  pensions  in  the 
British  colonies  relates  to  the  effect  on  poor  relief.  One  of 
the  popular  arguments  for  the  pension  policy  is  that  it  will 
reduce  greatly  the  outlay  for  relief  purposes.  The  con- 
tention is  that  the  establishment  of  a  pension  system  for 
the  aged  will  keep  them  out  of  the  almshouses.  It  is  argued 
that  the  consequent  reduction  of  expenditure  for  poor  re- 
lief will  offset  in  great  measure  the  cost  of  the  pensions. 
It  has  even  been  contended  that  the  adoption  of  a  pension 
plan  will  result  in  net  saving  to  the  State.  This  argument 
is  completely  discredited  by  the  experience  of  the  British 
colonies.  In  New  Zealand,  the  cost  of  in-door  relief  has 
risen  notably  since  the  pension  scheme  went  into  opera- 
tion, from  II  i-2d.  per  capita  of  the  population  in  1898 
to  IS.  5d.  per  capita  in  igo6.  The  treasurer  of  the  colony 
of  Victoria  states  that  the  introduction  of  the  old  age  pen- 
sion system  has  had  no  observable  effect  on  the  charitable  . 
institutions  of  that  State.  The  Australian  Royal  Commis- 
sion of  1905  expressed  the  opinion  that  the  adoption  of 
pension  systems  in  New  South  Wales  and  in  \'ictoria  had 
not  appreciably  lowered  the  amounts  voted  for  charitable 
purposes  by  the  governments  of  those  colonies.  The  ex- 
perience of  Denmark  may  also  be  cited.  The  expenditure 
for  poor  relief  has  increased  since  the  adoption  of  the  old 
age  pension  system  in  1891.  When  the  system  was  es- 
tablished it  was  expected  that  the  cost  of  poor  relief  would 
decrease  to  some  extent,  if  not  proportionately  to  the  grant 
of  old  age  relief.  For  a  few  years  this  expectation  was 
realized.  Since  1896,  however,  the  amount  expended  for 
poor   relief   has    steadily    increased,    and   in    1907   the    amount 


COMPULSORY  INSURANCE  225 

thus  expended  exceeded  the  expenditure  for  1890  bj'  nearly 
1,000,000  kroner  ($250,000).  The  total  expenditure  for  poor 
relief  in  1896,  when  it  reached  low  level,  was  7,105,000 
kroner  ($1,776,000);  in  1907  it  was  9,177,474  kroner 
($2,294,368). 

In  this  connection,  the  fact  disclosed  by  the  report  of 
the  British  Royal  Commission  of  1909  on  the  Poor  Laws 
that  the  number  of  indoor  paupers  has  increased  in  pro- 
portion to  the  population  since  1900  is  significant.  The 
last  annual  report  of  the  Local  Government  Board  shows 
also  an  increase  of  the  number  of  in-door  paupers  of  all 
ages  during  the  last  six  months  of  1908.  The  report  of  the 
Royal  Commission  on  the  Aged  Poor  connects  this  recent 
increase  of  in-door  pauperism  with  the  movement  for  old 
age  pensions,  which  culminated  in  the  enactment  of  the  law 
of  1908.  The  commissioners  state  that  this  movement  has 
created  a  general  feeling  that  state  is  able  and  willing 
to  make  provision  for  parents  whose  sons  fail  to  support 
them.  The  natural  consequence  of  the  weakening  of  filial 
obligation  has  been  an  increase  of  the  number  of  aged 
paupers. 

It  is  not  difficult  to  understand  why  poor  relief  ex- 
penditure fails  to  be  diminished  by  the  establishment  of  a 
pension  system.  In  the  first  place,  a  pension  system  hardly 
touches  the  mass  of  the  almshouse  population.  The  ma- 
jority of  inmates  of  pauper  institutions  are  there  not  be- 
cause of  poverty  alone,  but  because  of  disease,  infirmity,  or 
affliction,  which  necessitates  institutional  residence.  The 
grant  of  a  pension  will  not  take  such  persons  out  of  the 
institutions.  It  appears,  for  example,  that  about  92  per 
cent  of  the  aged  almshouse  population  in  INIassachusetts 
are  incapacitated  in  whole  or  in  part.  This  incapacity  is 
found  to  be  result  of  sickness  in  71  per  cent  of  the  cases. 
of  accident  in  15  per  cent,  and  of  old  age  in  2>^  per  cent. 
Futhermore,  it  appears  that  less  than  8  per  cent  of  the  aged 
almshouse  inmates  have  relatives  living  who  are  able  or 
willing  to  help  support  them.  In  the  second  place,  the 
more   liberal   policy   of   dealing   with   the   aged   under   a   gen- 


226  SELECTED  ARTICLES 

eral  pension  system  reacts  also  on  the  methods  of  pauper 
relief.  The  effect  is  to  promote  larger  expenditure  for 
charitable  purposes.  The  pension  system  sets  the  pace  for 
a  more  generous  administration  of  the  poor  laws.  Finally, 
the  tendency  of  a  pension  system  is  to  cultivate  in  the 
population  at  large  a  disposition  to  rely  upon  the  State, 
and  to  take  advantage  of  opportunities  of  public  assistance 
to  the  utmost  degree.  The  individual  relaxes  his  effort  to 
make  independent  provision  for  himself.  The  spirit  of  self- 
reliance,  self-support,  and  self-respect  tends  to  decline.  Mr. 
C.  S.  Loch,  secretary  of  the  London  Charity  Organiza- 
tion Society,  in  commenting  upon  the  recent  tendency  of 
pauperism  to  increase  in  Great  Britain,  remarks:  "The 
evidence  is  ample  that  it  is  due  to  that  public  opinion  which 
of  late  years  has  minimized  the  evils  of  State  dependence 
and  the  responsibilities  of  family  obligation,  and  has  ad- 
vocated schemes  for  old  age  pensions  and  other  measures 
that  cannot  but  tend  to  weaken  the  sense  of  social  duty 
and  lower  the  standard  of  personal  independence  in  the  com- 
munity." 

With  respect  to  the  effects  of  partial  non-contributory 
schemes  on  wages,  on  character  and  efficiency,  and  on 
family,  in  the  absence  of  conclusive  evidence  it  is  possible 
only  to  lay  down  certain  a  priori  generalizations. 

It  seems  clear  that  the  grant  of  pensions  by  the  State, 
without  contributory  payments  on  the  part  of  the  bene- 
ficiaries, must  tend  in  the  long  run  to  lower  the  rate  of 
wages.  In  the  first  place,  the  effect  of  pension  subsidies 
granted  by  any  state  must  be  to  attract  wage-earners  from 
outside,  and  thus  to  crowd  the  labor  market,  at  least  for  a 
time.  Even  if  a  period  of  residence  were  required  as  a  condition 
of  participation  in  the  pension  system,  its  existence  would, 
nevertheless,  operate  to  some  extent  as  an  inducement  to 
workers  to  take  up  their  residence  in  the  pensioning  state. 
This  could  hardly  fail  to  react  unfavorably  upon  the  wage 
rate.  It  is  true,  to  be  sure,  that  this  artificial  stimulus  to 
immigration  would  in  time  be  diminished  in  proportion  to 
any  reduction  of  the  wage  rate  which  attended  the  operation 
of  the  pension  system;  but  in  the  beginning  there  would  un- 


COMPULSORY  INSURANCE  227 

questionably    be    an    inducement    to    influx    of    workers    into 
the  pensioning  state. 

Furthermore,  the  direct  competition  of  the  pensioned 
aged  workers  would  tend  somewhat  to  depress  wages. 
Clearly,  if  a  part  of  the  workers  in  any  employment  are 
pensioned  by  the  State,  they  can,  if  they  choose,  underbid 
competitors  who  are  not  in  receipt  of  such  aid.  The  force 
of  this  influence  depends  largely  upon  the  age  at  which 
pensions  are  granted,  and  the  amount  of  the  pension  given. 
In  the  case  of  a  pension  system  that  provided  liberal  pen- 
sions at  an  early  age,  the  effect  on  wages  would  be  marked. 
Obviously,  a  pension  of  $500  a  year  to  all  workers  over 
50  years  of  age  would  affect'  the  rate  of  wages  most  unfav- 
orably in  the  manner  described.  If,  however,  the  pension- 
able age  were  fixed  at  70,  the  liability  of  depression  of  the 
wage  rate  through  the  competition  of  pensioned  workers 
would  not  be  considerable,  especially  if  the  amount  of  the 
pension  were  small,  as  in  the  existing  pension  schemes  of 
European  countries.  This  direct  competition  of  the  pen- 
sioned workers  is  probably  a  negligible  factor  so  far  as  , 
the  existing  systems  of  old  age  pensions   are  concerned. 

Far  more  serious  in  its  effect  on  wages  would  be  the  re- 
flex competition,  as  it  may  be  termed,  created  by  the  pen- 
sion system.  This  is  the  influence  of  the  prospect  of  a 
State  subsidy  in  old  age  in  relation  to  the  wage  require- 
ments of  adult  workers  in  general.  If  the  State  granted 
gratuitous  pensions  for  old  age,  this  fact  would  doubt- 
less be  taken  into  account  by  workers,  and  the  rate  of 
wages  that  they  would  demand  or  require  would  be  reduced 
correspondingly.  That  is  to  say,  the  prospect  of  a  State 
subsidy  would  reduce  the  need  of  individual  saving;  wage- 
earners,  not  being  under  the  necessity  of  making  full  pro- 
vision for  old  age,  could  afford  to  work  for  lower  wages. 
In  short,  the  amount  of  the  pension  would  be  discounted 
in  advance  by  the  workers  in  their  competition  for  employ- 
ment. 

Finally,   the   effect  on  wages   of  the  tax  burden   imposed 
by    a    pension    system,    must    be    taken    into    account.    The 


228  SELECTED  ARTICLES 

taxes  to  defray  the  expenses  of  a  non-contributory  pension 
system,  or  of  a  subsidized  pension  or  insurance  scheme, 
would,  in  the  first  instance,  fall  largely  upon  the  industries 
of  any  State  adopting  such  a  plan.  It  is  clear  that  the 
manufacturers  would  make  an  efifort  to  shift  this  burden, 
so  far  as  possible,  upon  consumers  or  upon  employees,  in 
the  form  of  higher  prices  or  lower  wages.  The  former  course 
would  be  practically  impossible  in  the  case  of  industries 
subject  to  interstate  competition.  The  general  tendency, 
then,  would  be  to  lower  wages. 

The  liability  of  a  depression  of  wages  through  indirect 
competition,  as  it  has  been  termed,  appears  to  be  the 
chief  consideration  here.  Of  course,  .the  extent  of  the  re- 
duction of  wages  that  might  be  brought  about  through 
this  influence  would  depend  upon  the  provisions  of  the 
pension  sj^stem,  especially  upon  the  amount  of  the  pension 
and  the  conditions  of  eligibility.  It  is  clear,  for  example, 
that  if  large  pensions  were  provided  for  all  aged  persons, 
without  an}^  restriction  whatever  as  to  eligibility,  the  ef- 
fect must  be  to  lower  wages  to  a  marked  degree.  With 
pensions  of  small  amount  and  wi|h  stringent  conditions  of 
administration,  the  effect  upon  the  wages  would  be  less 
marked;  but  even  then  the  prospect  of  pensions  would 
doubtless  operate  as  a  barrier  to  advances  of  wages  which 
otherwise  the  working  class  might  obtain.  It  is  to  be 
feared,  therefore,  that  the  establishment  of  a  subsidized  pen- 
sion or  insurance  system  would  stand  in  the  way  of  realiza- 
tion of  the  ideal  of  an  adequate  living  wage.  If  the  State 
undertakes  to  support  aged  workers  in  whole  or  in  part, 
the  effect  must  be  to  lower  proportionately  the  actual  or 
potential  rate  of  wages  in  the  pensioning  State. 

The  influence  of  a  non-contributory  pension  scheme  up- 
on character  and  efficiency  would  undoubtedly  be  as  un- 
favorable as  the  effect  upon  wages.  The  motives  and  en- 
ergies of  self-help  would  be  weakened  by  this  form  of 
state  help.  The  assurance  of  public  support  in  old  age 
unattended  by  any  degree  of  discredit  attached  to  its  ac- 
ceptance  would  lead  wage-earners   to   relax   their   efforts  to 


COMPULSORY  INSURANCE  229 

make  independent  provision  for  their  declining  years.  It 
would  weaken  the  incentives  to  individual  saving.  This 
seems  so  obvious  that  it  is  surprising  to  find  amoung  pro- 
fessional economists  any  dissent  on  this  question.  Professor 
Henry  R.  Seager,  however,  not  only  denies  that  a  non- 
contributory  pension  scheme  will  discourage  saving,  but 
goes  even  further  and  contends  that  it  will  have  the  posi- 
tive effect  of  quickening  the  development  of  that  spirit  of 
independence  and  self-help,  which  lies  at  the  basis  of  all 
true  progress.  "The  new  policy,"  he  believes,  "far  from  dis- 
couraging thrift  and  foresight,  will  tend  on  the  whole  to 
encourage  them." 

This  prediction  seems  opposed  to  the  common  habits 
and  usual  tendencies  of  human  nature.  The  thrift  habit  is 
not  instinctive  and  universal;  it  is  the  rare  product  of  care- 
ful training.  It  is  extremely  hard  to  build  up  and  very 
eas3-  to  break  down.  The  aim  of  modern  poor  law  reform 
has  been  to  cultivate  this  habit  by  penalizing  unthrift  and 
stigmatizing  dependency.  The  enactment  of  the  British  old 
age  pension  act  of  1908  means  abandonment  of  this  ap- 
proved policy  of  conserving  thrift,  and  reversion  to  the  dis- 
credited methods  of  general  out-door  relief.  The  gravest 
consequences  are  to  be  apprehended  from  the  change.  It 
threatens  disaster  to  voluntary  agencies  for  the  encourage- 
ment of  saving,  such  as  the  friendly  societies.  The  un- 
fortunate influence  of  the  pension  system  upon  these  or- 
ganizations was  the  subject  of  serious  discussion  at  the 
recent  annual  meeting  of  the  friendly  societies.  The  gen- 
eral expectation  that  the  old  age  pension  system  will 
soon  be  supplemented  by  state  insurance  against  sickness 
and  accident  has  -operated  to  the  further  disadvantage  of 
the  friendly  societies.  It  needs  no  argument  to  show  that 
this  check  to  the  growth  of  voluntary  thrift  agencies  is  a 
most  serious  evil,  moral  as  well  as  economic.  In  general, 
moreover,  the  new  pension  policy  must  exert  an  enervating 
and  demoralizing  influence  upon  character,  lessening  the 
sense  of  personal  responsibility  and  self-reliance,  and  sap- 
ping  the   foundations    of   individual   initiative    and    ambition. 


230  SELECTED  ARTICLES 

A  non-contributory  pension  is  simply  poor  relief  in  disguised 
form.  The  acceptance  of  such  a  dole  is  hardly  compatible 
with  a  vigorous  spirit  of  self-supporting  and  self-respecting 
independence. 

In  a  similar  way,  the  non-contributory  pension  policy 
would  weaken  the  bonds  of  family  solidarity.  It  would 
take  away,  in  part,  the  filial  obligation  for  the  support  of 
aged  parents,  which  is  one  of  the  main  ties  that  hold  the 
family  together.  The  supporters  of  this  policy  deny  that 
this  result  would  follow.  They  contend  that,  on  the  con- 
trary, their  plan  would  strengthen  the  family  institution; 
they  reason  that  the  payment  of  small  pensions  to  old  per- 
sons would  help  to  keep  families  together  by  making  it 
possible  for  the  children  to  retain  the  aged  parent  in  the 
household  in  view  of  the  addition  that  his  pension  would 
bring  to  the  family  income.  While  this  might  be  true  in 
individual  cases,  it  can  hardly  be  doubted  that  the  gen- 
eral effect  on  the  family  would  be  disintegrating.  The  as- 
sumption by  the  State  of  the  obligations  to  support  the 
aged  in  their  homes  would  imdermine  filial  responsibilit3% 
precisely  as  the  guarantee  of  public  maintenance  of  children 
would  destroy  parental  responsibility.  The  impairment  of 
family  integrity  is,  in  fact,  one  of  the  most  serious  dangers 
threatened  by  recent  experiments  with  non-contributory 
pensions. 

(2)  The  comijulsorj'  insurance  system  of  Germanj'  pre- 
sents a  direct  contrast  to  the  non-contributory  pension 
schemes  of  Great  Britain  and  her  colonies.  The  latter  are 
based  on  the  principle  that  the  obligation  to  support  the 
aged  rests  upon  the  state,  and  that  the  superannuated  worker 
may  claim  a  pension  of  the  State  as  a  right,  not  as  a  charity. 
The  German  plan  is  founded  on  the  opposite  principle  that 
the  obligation  to  provide  for  old  age  rests  upon  the  indi- 
vidual, and  that  the  State  should  enforce  the  performance 
of  this  duty  and  at  the  same  time  facilitate  the  required 
provision  for  old  age  through  the  compulsory  co-operation 
of  employers  and  the  payment  of  state  subsidies  to  the  in- 
sured. 


COMPULSORY  INSURANCE  231 

The  German  sj'Steni  of  compulsory  insurance  has  been  in 
operation  long  enough  to  demonstrate  to  some  extent  its 
social  effects.  In  the  main,  the  results  must  be  pronounced 
satisfactory.  The  plan  is  unquestionably  the  most  effec- 
tive and  successful  scheme  of  old  age  support  now  in  exis- 
tence. The  attitude  of  public  opinion  in.  Germany  toward 
the  compulsory  insurance  laws  is  generally  favorable. 
Recent  testimonj^  as  to  the  successful  working  of  the  sys- 
tem is  furnished  by  Mr.  Frederick  L.  Hoffman,  statistician 
of  the  Prudential  Insurance  Company,  who  in  the  summer 
of  1909  visited  Germany  and  studied  the  operation  of  the 
compulsory   insurance   laws.     Mr.    Hoffman   states: 

"There  is  much  discontent  with  the  administration  of  the  in- 
surance laws,  but  the  system  itself  is  so  well  thought  of  that  repeal 
of  the  law  is  out  of  the  question.  There  is  no  dissenting  opinion,  even 
on  the  part  of  life  insurance  managers,  that  government  insur- 
ance has  resulted  in  far-reaching  reforms,  that  it  has  been  of 
vast  benefit  to  the  people  and  to  the  nation  at  large,  and  that 
it  has  come  to  stay.  .  .  .  The  interests  of  capital  and  labor  have 
certainly  been  harmonized  remarkably  in  Germany,  and,  speaking 
from  personal  observation  extending  over  a  generation,  the  con- 
trast of  to-day  with  the  past  is  truly  marvelous.  How  far  gov- 
ernment insurance  has  had  a  share  in  this  progress  it  is  of  course 
impossible  to  say;  ))ut  all  with  whom  I  have  discussed  the  subject 
are  but  of  one  mind. — that  the  effect,  on  the  whole,  has  been 
decidely  for  good.  It  is  admitted  that  the  system  has  not  brought 
industrial  peace,  and  that  the  socialists  were  never  so  powerful 
as  they  are  to-day;  it  is  conceded  that  there  is  much  complaint 
and  much  discontent;  but  the  evidence  otherwise  is  superabundant 
that  the  skilled  German  workman  in  the  large  cities  is  decidedly 
well  off  in  a  material  way,  that  he, is  well  housed,  well  fed,  and 
on   the   whole   well  paid." 

A  further  extension  of  old  age  and  invalidity  insurance 
to  include  adequate  provision  for  dependent  survivors  in 
case  of  the  death  of  the  insured,  is  proposed  in  the  draft 
of  a  new  law  submitted  by  the  Chancellor  to  the  Bundes- 
rath,  in  April,  1909.  This  law  also  co-ordinates  the  various 
branches  of  the  insurance  into  a  complete  system  that  will 
furnish  protection  to  the  working-man  in  all  the  emergencies 
of  life,  except  unemployment.  This  contemplated  extension 
of  the  system  is  in  itself  evidence  of  its  generally  satisfac- 
tory results. 

The  effect  of  compulsory  insurance  on  the  extent  of 
pauperism  and  the  expenditure  for  poor  relief  in  Germany 
can  not  be  statistically  determined.  Whether  the  establish- 
ment  of  the   system   has   resulted    in    diminution   of  pauper- 


232  SELECTED  ARTICLES 

ism  and  reduction  of  the  financial  burden  of  poor  relief,  or 
the  reverse,  has  been  much  discussed.  Professor  Henry  W. 
Farnam,  who  has  made  an  examination  of  statistical  data 
and  other  information  bearing  on  this  question  is  of  the 
opinion  that  the  burden  of  poor  relief  has  not  been  dimin- 
ished in  consequence  of  the  insurance  laws.  Recent  data 
relating  to  the  efifect  of  compulsory  insurance  on  poor  relief 
expenditure  were  obtained  by  Mr.  Hoffman  in  the  course 
of  his  recent  investigation  of  the  insurance  laws.  He  made 
inquiries  on  this  subject  in  Berlin,  Cologne,  and  other  Ger- 
man cities.  The  burgomaster  of  Cologne  was  emphatic  in 
the  opinion  that  the  insurance  system  had  materially  re- 
duced the  poor  law  expenses  of  that  city.  But  the  figures 
of  per  capita  cost  of  out-door  poor  support  in  recent  3-ears 
do  not  sustain  this  contention  that  govermnent  insurance 
has  reduced  pauperism  in  Cologne.  The  per  capita  cost 
increased  from  5.07  marks  in  1897  to  5.56  marks  in  1902  and 
to  6.38  marks  in  1907.  The  net  cost  to  the  city,  exclusive 
of  income  from  funds  invested  for  charitable  purposes,  was 
3.42  marks  per  capita  in  1897,  4.32  marks  in  1902,  and  5.29 
marks  in  1907.  Again,  the  President  of  the  Imperial  Insur- 
ance Office  in  Berlin  is  quoted  by  Mr.  Hoffman  as  express- 
ing the  opinion  that  a  decided  and  general  reduction  of  poor 
relief  resulting  from  government  insurance  cannot  be  statis- 
tically established.  Finally,  Dr.  Emil  Miinsterberg,  the  most 
eminent  European  authority  on  poor  law  administration,  is 
cited  by  -\Ir.  Hoffman  as  expressing  agreement  with  this 
opinion.  It  is  argued,  however,  that  the  primary  intent  of 
the  insurance  system  is  not  to  reach  the  pauper  class,  but 
rather  to  conserve  the  economic  resources  of  the  real 
wage-earning  population,  and  to  keep  its  members  from 
becoming  a  burden  upon  charity  in  sickness,  accident  or  old 
age.  This  object  the  insurance  laws  have  unquestionably 
accomplished. 

Regarding  the  eft'ect  of  compulsory  insurance  upon  wages, 
it  is  more  difficult  to  generalize  with  confidence  than  in  the 
case  of  non-contributory  pensions.  So  far  as  the  State 
paj^s  subsidies   to  the  insured,  the  tendency  is  doubtless   to 


CO.MPULSORY  IXSURAXCE  233 

cause  a  proportionate  reduction  of  wages;  these  subsidies 
are  discounted  in  the  competition  of  the  labor  market,  just 
as  would  be  non-contributory  pensions.  To  a  certain  ex- 
tent, also,  the  compulsory  contributions  of  employers  are 
shifted  upon  the  workers  in  the  form  of  lowered  wages. 
The  view  that  the  employers'  contributions  must  in  the  long 
run  be  paid  by  the  working  man  is  accepted  by  President 
Hadley  who  reasons  thus:  "The  payments  to  the  insurance 
funds  must  chiefly,  if  not  wholly,  come  out  of  wages.  Even 
tho  they  be  nominally  levied  on  the  employer,  he  is  com- 
pelled, by  competition  with  other  employers  not  subject  to 
this  levy,  to  reduce  in  corresponding  degree  the  wages  he 
pays." 

This  argument  is  based  on  the  assumption  that  the  em- 
ployers who  have  to  pay  insurance  contributions  are  in  all 
cases  subject  to  competition  with  other  employers  not 
thus  burdened.  This  would  probably  hold  true,  in  general, 
of  any  American  state  adopting  an  insurance  system  like 
the  German;  the  tendency  would  be  to  a  reduction  of  wages 
as  argued  by  President  Hadley.  In  Germany,  however,  the 
rate  of  wages  has  actually  risen,  instead  of  fallen,  since  the 
introduction  of  compulsory  old  age  insurance.  It  is  con- 
ceivable that  the  efifect  has  been  to  prevent  so  great  an 
advance  in  wages  as  otherwise  might  have  taken  place,  but 
it  is  clear  that  the  laws  have  not  imposed  any  impassible 
barrier  to  the  advance  of  wages.  The  cost  of  German  old 
age  insurance  has  certainly  not  come  out  of  wages  in  any 
large  part.  The  burden  of  supporting  the  system  has  been 
divided  between  the  State,  the  employer,  and  the  employed, 
— in  what  proportion  it  is  impossible  to  determine. 

In  estimating  the  likelihood  of  a  reduction  of  wages  un- 
der the  operation  of  a  compulsory  insurance  system  sup- 
ported partly  by  contributions  from  employers,  account  must 
be  taken  of  the  social  condition  of  the  wage-earners,  par- 
ticularly the  education  and  the  organization  of  the  working 
class,  and  of  the  attitude  of  public  opinion  as  afifecting  the 
ability  of  the  class  to  resist  pressure  on  the  wage  rate.  It 
must  further  be  considered  whether  anj'  increase  of  efficien- 


234  .   SELECTED  ARTICLES 

cy  on  the  part  of  labor  is  brought  about  by  the  insurance 
system  as  an  offset  to  the  tendency  toward  reduction  of 
wages.  In  general,  however,  it  must  be  recognized  that 
the  effect  on  wages  of  an  insurance  system  supported  part- 
ly by  assessments  on  employers  would  probably  be  unfavor- 
able, especially  if  the  system  were  established  in  a  single 
American  state,  since  most  branches  of  industry  are  subject 
to   inter-state   competition. 

The  influence  of  compulsory  insurance  on  character  and 
efficiency,  as  well  as  on  family  life,  would  manifestly  be  far 
less  injurious  than  that  of  non-contributory  pensions.  It  is 
evident,  however,  that  any  compulsory  system  must  to  a 
certain  degree  exercise  an  enervating  influence  on  wage- 
earners.  Compulsion  is  not  favorable  to  the  highest  de- 
velopment of  individual  initiative,  independence,  responsibil- 
ity, and  self-reliance.  Full  individual  responsibility  as  re- 
gards provision  for  old  age  exerts  a  healthful  stimulative 
and  educative  effect  on  the  individual.  From  the  point  of 
view  of  social  effects,  a  voluntary  system  is  certainly  prefer- 
able to  a  compulsory.  There  is  an  inevitable  weakening 
of  vigor  and  resourcefulness  under  any  compulsory  scheme 
of  social  reform. 

(3)  The  voluntary  annuity  schemes  recently  instituted  in 
Canada  and  Massachusetts  are  not  open  to  the  objections 
which  have  been  pointed  out  in  the  case  of  non-contributory 
pensions  and  compulsory  insurance  plans.  The  former  ex- 
ercise no  unfavorable  influence  on  wages,  on  character  and 
efficiency,  or  on  the  family.  The  social  effects  of  voluntary 
insurance,  so  far  as  it  can  be  made  practically  effective,  are 
clearly  beneficial.  The  only  objection  that  can  be  urged 
against  the  annuity  systems  relates  to  their  practicability  as 
a  general  solution  of  the  problem  of  providing  for  old  age 
support.  It  is  maintained  that  no  voluntary  system  of  in- 
surance can  reach  the  class  of  low-paid  laborers  most  in 
need  of  special  provision  for  old  age.  Any  voluntary 
scheme  must,  it  is  argued,  be  extremely  limited  in  its  appli- 
cation; it  can  never  become  general,  including  all  members 
of    the    wage-earning    population.     The    late    Professor    A. 


COMPULSORY  IXSURAXCE  235 

Shcafflc  lias  put  tliis  argument  affectively:  "Experience  has 
everywhere  demonstrated  that  the  great  mass  of  those  work- 
ing men  who  are  poorly  off  will  not  voluntarily  insure  them- 
selves. Furthermore,  the  great  majority  of  those  who  would 
like  to  do  so  cannot,  on  account  of  the  smallness  of  their 
earnings.  In  other  words,  it  is  exactly  that  class  which  is 
most  in  need  of  insurance  that  either  will  not  or  cannot  avail 
themselves  of  this  device.  This  is  the  fundamental  weak- 
ness of  voluntary  insurance.  It  fails  to  reach  the  class  most 
in  need  of  it." 

The  annuity  systems  of  Canada  and  Massachusetts  have 
been  too  short  a  time  in  operation  to  demonstrate  their  pos- 
sibilities. The  Massachusetts  Savings  Bank  Insurance  plan 
v/ent  into  operation  in  June,  igo8,  and  the  Canadian  Govern- 
ment Annuities  System  in  January,  1909.  The  reports  of  the 
operation  of  the  two  laws  show,  however,  that  thus  far  only 
slight  use  has  been  made  of  the  provisions  for  the  purchase 
of  annuities.  During  the  first  year  of  the  operation  of  the 
Massachusetts  Savings  Bank  Insurance  Act,  ending  October 
31,  1909,  only  32  annuity  contracts  were  issued,  representing 
an  annual  payment  in  premiums  of  $5408.  The  Canadian 
system  naturally  makes  a  slomewhat  better  showing  in  this 
respect,  as  it  deals  exclusively  in  annuities,  selling  no  insur- 
ance. During  the  first  seven  months  of  operation,  ending 
July  31,  1909,  288  annuity  contracts  were  issued,  including  44 
immediate  annuities  and  244  deferred  annuities,  representing 
payments  in  purchase  money  and  premiums  of  $206,410.15. 
The  Commissioner  of  Government  Annuities  is  making  vig- 
orous efforts  to  bring  the  system  to  the  general  attention  of 
vv'orking  people  and  employers,  but  with  only  moderate  suc- 
cess. The  longer  experience  of  the  British  Postal  Annui- 
ties System,  established  in  1864,  is  significant  in  this  con- 
nection as  showing  the  dii^culty  of  bringing  a  plan  of 
voluntary  insurance  into  effective  general  use.  The  number 
of  annuities  issued  through  the  post  offices  is  very  small. 
During  the  last  ten  years  the  average  number  of  new  an- 
nuity contracts  issued  annually  has  been  about  150,  and  the 
total    amount    of    insurance    represented    has    averaged    only 


236  SELECTED  ARTICLES 

$15,000  per  year.  As  compared  with  the  business  done  by 
the  private  insurance  companies  the  results  of  the  post  office 
insurance  system  must  be  termed  insignificant.  In  forty 
years  the  government  issued  through  the  post  offices  only 
about  the  same  number  of  policies  that  the  London  Pruden- 
tial writes  in  ten  days.  It  must  seriously  be  questioned 
whether  the  Massachusetts  system  of  savings  bank  insurance 
or  the  Canadian  plan  of  government  annuities  can  be  so  ex- 
tended as  to  constitute  a  satisfactory  solution  of  the  problem 
of  old  age  pensions. 

Each  of  the  three  plans  of  old  age  provision  which  have 
been  considered — non-contributory  pensions,  compulsory  in- 
surance, and  voluntary  annuity  schemes — has  been  found  to 
be  objectionable  or   inadequate   in   certain   respects. 

The  non-contributorj'  system  was  adopted  by  Great  Bri- 
tain as  a  measure  of  last  resort  under  the  pressure  of  irresis- 
tible demand  for  a  sweeping  measure  of  old  age  relief.  This 
demand  arose  from  certain  social  conditions  which  fortunate- 
ly have  no  parallel  in  any  American  state.  Pauperism  in 
general  and  old  age  pauperism  in  particular  are  far  more 
prevalent  in  England  than  in  the  United  States.  The  recent 
investigation  by  the  Massachusetts  Commission  on  Old 
Age  Pensions  shows  that  there  is  no  alarming  amount  of  old 
age  destitution  in  this  state.  The  comparative  statistics  of 
pauperism  in  Great  Britain  and  Massachusetts  show  a 
strikingly  small  proportion  of  old  age  dependency  in  the 
latter  Commonwealth,  as  contrasted  with  Great  Britain.  The 
number  of  paupers  of  all  ages  per  one  thousand  of  the 
population  is  only  8.5  in   Massachusetts,  as  contrasted  with 

24.2  in  the  United  Kingdom;  the  number  of  paupers  65  years 
of  age  and  over  per  one  thousand  of  the  population  of  the 
same  age,  is  only  31.7  in  ^Massachusetts,  as  against  172  in 
the  United  Kingdom;  and  finally  the  percentage  of  paupers  65 
years  of  age  and  over,  in  the  total  pauper  population,  is  only 

20.3  in  Massachusetts  as  compared  with  35  in  the  United 
Kingdom.  Fortunately  there  is  in  Massachusetts,  and  pre- 
sumably in  other  American  states,  no  such  mass  of  poverty 
and  distress  as  would  call  irresistibly  for  the  institution   of 


COMPULSORY  INSURANCE  237 

sweeping  pension  schemes.  An  old  age  pension  system  of 
a  non-contributory  character  is  a  counsel  of  despair.  Great 
Britain  was  driven  to  adopt  this  policy  by  the  popular  de- 
mand growing  out  of  intolerable  social  conditions.  This  ex- 
cuse for  pension  legislation  does  not  exist  in  any  American 
state.  The  establishment  of  a  non-contributory  pension 
system  in  this  country  would  lack  even  the  slight  measure 
of  justification  which  may  be  urged  in  defence  of  the  British 
legislation. 

The  adoption  of  any  scheme  of  compulsory  insurance, 
furthermore,  appears  to  be  inexpedient  in  this  country  at 
the  present  time.  The  practical,  constitutional,  and  ethical 
objections  to  such  action  are  weighty.  The  idea  of  compul- 
sion is  essentially  distasteful  to  Americans.  It  was  the  na- 
tural dislike  of  Englishmen  for  compulsion  of  any  sort  which 
led  to  the  rejection  of  compulsory  insurance  plans  proposed 
in  that  country.  The  proposal  of  compulsory  insurance  is, 
furthermore,  of  doubtful  constitutionality.  It  raises  the 
question-  of  the  constitutionality  of  a  law  obliging  wage- 
earners  to  set  aside  a  certain  percentage  of  their  earnings 
to  provide  annuities  for  themselves  in  old  age.  If  it  could 
be  shown  that  the  effect  of  the  compulsion  would  be  to  dim- 
inish pauperism  and  protect  the  State  against  the  burden  of 
old  age  dependency,  such  exercise  of  compulsion  might  con- 
ceivably be  justified  as  a  preventive  measure  of  poor  relief. 
This  consideration,  however,  seems  to  be  the  only  one  that 
could  be  consistently  urged  in  support  of  the  constitution- 
ality of  compulsory  insurance.  There  is  grave  doubt  wheth- 
er this  consideration  would  be  held  by  the  courts  to  justify  a 
compulsory  insurance  law.  Finally,  there  is  the  objection 
on  the  ground  of  the  paternalizing  and  enervating  influence 
of  compulsion  upon  character. 

In  view  of  these  objections  it  would  be  unwise  to  resort 
to  compulsion  in  dealing  with  the  problem  of  old  age  in- 
surance at  the  present  time.  It  is  conceivable,  however,  that 
the  ultimate  solution  of  this  problem  may  be  found  in  some 
system  of  obligatory  state  insurance.  The  principle  of 
compulsory  education  has  been  adopted  and  widely  extend- 


238  SELECTED  ARTICLES 

ed;  the  principle  of  compulsory  sanitation  has  been  applied 
in  various  directions.  Compulsory  insurance  has  been  de- 
fended as  a  needful  measure  of  further  state  interference  for 
the  protection  of  society  against  the  burden  of  old  age 
pauperism,  precisely  as  compulsory  education  and  sanita- 
tion have  been  adopted  to  protect  society  against  ignorance 
and  disease.  The  final  solution  here  suggested,  however,  lies 
so  far  in  the  future  that  it  would  be  idle  to  consider  it  at 
this  time. 

The  proper  course  of  action  for  the  immediate  future  in 
dealing  with  the  pension  problem  in  American  states  con- 
sists in  the  development  and  extension  of  various  agencies 
of  voluntar}^  saving.  Whatever  is  done  in  this  field  should 
be  in  harmony  with  the  principle  that  provision  for  old  age 
should  be  a  charge  vipon  wages  to  be  borne  by  the  wage- 
earner.  The  ideal  of  a  living  wage,  which  should  govern  all 
that  may  be  done  in  this  field,  demands  a  wage  adequate 
not  only  for  the  support  of  the  average  family  in  reasonable 
comfort,  but  also  for  provision  through  saving,  against  all 
the  emergencies  of  life,  sickness,  accident,  and  old  age.  No 
measure  of  old  age  relief  should  be  adopted  which  would 
reduce  wages  or  stand  in  the  way  of  the  future  advance  of 
wages  to  an  adequate  living  basis.  This  fundamental  consid- 
eration must  be  kept  steadily  in  view. 

A  program  in  harmony  with  this  consideration  may  be 
constructed  as  follows: 

I.  The  establishment  of  retirement  systems  for  public 
emplo3^ees  based  on  the  contributory  principle.  The  expens- 
es of  such  pension  schemes  should  be  divided  between  the 
employees  and  the  state,  county,  city  or  town.  It  is  logical 
that  the  public  corporation  as  an  employer  of  labor  should 
contribute  something  to  the  funds  out  of  which  allowances 
to  superannuated  employees  are  paid.  Such  contributions 
may  be  regarded  as  of  the  nature  of  extra  compensation  for 
long,  faithful,  and  efficient  service.  That  is  to  say,  in  addi- 
tion to  payment  of  current  wages  the  public  employer  may 
properly  ofifer  a  special  additional  allowance  in  the  form  of 
contributions   to   retirement   funds   for   workers   who    remain 


COMPULSORY  INSURANCE  239 

in  the  service  a  certain  period  of  years  and  reach  a  specified 
age,  meanwhile  contributing  from  their  wages  to  provide 
insurance  for  their  old  age.  Thus  far  in  the  United  States 
only  a  small  beginning  has  been  made  in  the  field  of  pen- 
sions for  public  employees.  There  is  no  general  legislation 
on  this  subject,  either  national  or  state.  No  American  city 
has  yet  established  a  general  pension  system  for  all  em- 
ployees. The  existing  provisions  for  municipal  pensions  are 
confined  to  certain  classes  of  employees,  notably  policemen, 
firemen,  and  teachers.  The  general  establishment  of  retire- 
ment systems  for  the  employees  of  national,  state,  and  local 
governments  would  provide  old  age  insurance  for  one  large 
class   of  the  wage-earning  population. 

2.  The  institution  of  contributory  retirement  systems  by 
corporations  and  large  employers  of  labor.  Public  service 
corporations  especially  can  safely  and  profitably  undertake 
this  form  of  welfare  enterprise.  The  recent  rapid  extension 
of  pension  and  insurance  systems  among  public  service  cor- 
porations in  this  country  is  an  important  movement  toward 
the  solution  of  the  old  age  pension  problem.  The  Massa- 
chusetts Commission  obtained  information  concerning  fifty 
of  these  schemes,  twenty-eight  of  which  are  maintained  by 
railway  companies  and  twenty-two  by  industrial,  commercial, 
or  banking  establishments.  It  is  unfortunate,  however,  that 
the  majority  of  these  schemes  are  wholly  non-contributory. 
Whatever  is  done  in  the  future  in  the  way  of  extending  re- 
tirement systems  for  employees  of  corporations  should  be 
based  upon  the  contributory  principle;  the  expense  should 
be  borne  jointly  by  employer  and  employed,  as  in  the  case 
of  public  pension  systems.  The  general  establishment  of 
retirement  systems  for  employees  of  corporations  would 
make  provision  for  another  large  group  of  the  working  class. 

3.  The  extension  of  the  agencies  that  afiford  opportunity 
for  old  age  insurance,  including  private  associations,  such  as 
trade  unions,  beneficiary  societies,  and  the  like,  and  public 
schemes  of  voluntary  insurance,  such  as  the  Canadian  and 
Massachusetts  annuity  systems.  This  class  of  insurance  can 
hardly  be  expected  to  reach  the  great  mass  of  unskilled  and 


240  SELECTED  ARTICLES 

low-paid  labor,  for  the  reasons  already  set  forth.  The  high- 
er ranks  of  skilled  labor  and  of  salaried  employment  can, 
however,  be  adequately  provided  with  old  age  insurance 
through  these  agencies.  It  is  desirable  that  any  obstacles 
which  may  now  lie  in  the  way  of  the  extension  of  voluntary 
thrift  institutions  be  removed.  To  this  end  the  laws  govern- 
ing the  operation  of  fraternal,  beneficiary  corporations,  which 
in  many  states  now  prevent  the  payment  of  old  age  benefits, 
should  be  amended  so  as  to  enable  these  societies  to  provide 
old  age  insurance  for  their  members  under  supervision  by 
the  state  insurance  department.  Another  measure  designed 
to  promote  individual  saving  and  strengthen  voluntary  thrift 
agencies,  which  was  recommended  by  the  Massachusetts 
Commission  and  adopted  by  the  last  legislature,  is  compul- 
sory instruction  in  thrift  in  the  public  schools.  This  project 
is  not  purely  theoretical  or  fanciful,  for  the  subject  of  thrift 
is  taught  effectively  in  the  public  schools  of  European 
countries,  notably  in  France  and  Germany. 

4.  The  adoption  of  preventive  measures  designed  to  re- 
duce the  volume  of  old  age  dependency.  Adequate  provi- 
sions for  industrial  education  will  eventually  accomplish 
substantial  results  toward  this  end.  Measures  calculated  to 
diminish  the  amount  of  sickness  and  accident  and  to  provide 
satisfactory  compensation  for  industrial  injuries  are  also  of 
vital  importance  in  this  connection.  Whatever  can  be  done 
to  check  economic  waste  from  this  source,  which  is  now  a 
large  factor  in  producing  old  age  pauperism,  will  contribute 
directly  to  the  solution  of  the  pension  problem. 

5.  The  creation  of  a  permanent  state  commission  or  com- 
missions of  old  age  insurance.  The  chief  function  of  such  a 
department  would  be  to  act  as  a  bureau  of  information  and 
assistance  to  employers  and  employees  and  particularly  to 
aid  and  advise  them  regarding  the  establishment  of  retire- 
ment systems.  The  extension  of  retirement  systems  in  the 
field  of  corporate  and  public  employment  could  be  promoted 
and  directed  by  such  a  bureau.  The  bureau  could  also  ren- 
der important  service  by  studying  the  operation  of  various 
agencies,  public  or  private,  that  have  been  created  for  deal- 


COMPULSORY  INSURAXXE  241 

ing  with  the  problem  of  old  age  pensions  and  guiding  future 
legislation  on  this  subject  by  exact  knowledge  of  facts. 

The  fundamental  object  of  the  policies  here  outlined  is 
to  conserve  and  strengthen  habits  of  voluntary  saving  and 
to  create  and  extend  agencies  providing  for  its  exercise. 
There  will  doubtless  remain  a  certain  residuum  of  low-paid 
labor  which  cannot  be  provided  for  in  respect  to  old  age 
insurance  through  measures  of  this  character.  It  is  difficult, 
indeed,  to  see  how  this  unfortunate  group  could  be  dealt 
with  effectively  even  under  a  compulsory  insurance  system. 
Irregular  employment  and  insufficient  wages  place  a  certain 
percentage  of  the  working  class  beyond  the  reach  of  any  in- 
surance S3'stem.  The  present  poor  laws  are  designed,  how- 
ever, to  meet  precisely  this  need  of  provision  for  a  class 
that  cannot  be  trained  to  economic  competency  and  self- 
supporting  independence  throughout  all  the  period  of  life. 
It  would  be  a  disastrous  policy  to  institute  any  system  of 
gratuitous  pensions  for  the  particular  benefit  of  this  unfortun- 
ate class.  The  number  in  the  class  is  not  large  in  the 
American  states.  By  establishing  a  pension  system  for  the 
benefit  of  the  small  minority  of  wage-earners  who  may  pos- 
sibly need  such  aid  the  State  would  strike  a  blow  at  the 
resources  of  voluntary  thrift,  individual  responsibility,  and 
family  integrity  which  have  enabled  the  great  majority  of 
the  population  to  maintain  themselves  in  self-supporting  in- 
dependence. In  the  impatient  effort  to  help  things  forward 
at  a  faster  pace  we  should,  by  attempting  an  experiment  of 
this  kind,  imm.ediately  retard  and  ultimately  reverse  the 
normal  process  of  social  betterment. 


242  SELECTED  ARTICLES 

Charities  and  the  Commons.  20:  343-7.  June  6,  1908. 

Poverty  and  Insurance  for  the  Unemployed. 

Belle  Lindner  Israels. 

Insurance  for  the  unemployed  is  a  comparatively  new- 
question.  During  the  last  decade  it  has  attracted  much  at- 
tention in  Germany  and  in  nearly  all  of  the  more  progres- 
sive countries  it  has  received  consideration. 

Investigation  of  the  question  as  it  affects  Germany  was 
conquest  upon  a  resolution  passed  in  the  Reichstag  in 
January  31,  1902,  by  which  the  chancellor  of  the  empire  was 
requested  to  appoint  a  special  commission  to  conduct  a  care- 
ful inquiry  into  the  systems  of  insurance  of  this  character  in 
existence  up  to  this  time,  and  to  formulate  a  plan  for  their 
efficient  development.  This  resolution  was  finally  referred 
to  the  Imperial  Bureau  of  Statistics  in  November  of  the  same 
year  and,  in  complying  with  its  provisions,  the  Department 
of  Labor  Statistics  made  an  investigation  of  the  systems  in 
vogue  in  Germany  and  in  foreign  countries,  with  a  thorough- 
ness never  attempted  prior  to  that  time. 

The  results  of  this  investigation  were  published  in  three 
volumes  in  igo6  under  the  title:  The  Present  Arrangements 
for  Insurance  Against  the  Lack  of  Employment  in  Foreign 
Countries  and  in  the  German  Empire.  Part  I,  Insurance 
Against  the  Results  of  Lack  of  Employment.  Part  II,  The 
Status  of  Co-operative  Employment  Bureaus  in  the  German 
Empire  (Public  and  Private).  Part  III,  Appendix  to  Part 
f;  Statistics,  Laws,  Ordinances  and  Statutes  compiled  by  the 
Imperial  Statistical  Bureau,  Department  of  Labor  Statistics, 
Karl   Heymans,  Publisher,   Berlin,   1906. 

Charitable  relief  is  the  oldest  form  of  care  of  the  unem- 
ployed. To  a  certain  extent  it  was  the  mother  of  all  care 
especially  at  a  time  when  labor  organizations  were  but  little 
developed  and  not  in  a  position  to  help  their  members  over 
a  season  of  idleness.  Most  laboring  people  are  without  ap- 
preciable means  and  dependent  upon  their  work,  and  a  con- 
siderable number  are  not  in  a  position  to  save  such  amounts 


COMPULSORY  INSURANCE  243 

as  will  suffice  to  support  a  family  for  any  length  of  time. 
Consequently  the  tendency  of  any  long  period  of  idleness  is 
toward  poverty;  even  though  in  actual  practice  the  credit  of 
the  storekeeper,  the  consumer's  society  or  the  landlord  en- 
ables many  individuals  to  avoid  this  condition. 

Poverty  easily  drags  the  poor  man  down,  weakens  him 
physically,  diminishes  his  moral  resistance,  makes  him  less 
valuable  as  a  working  force,  and  frequently  leads  to  lack  of 
employment,  as  at  every  crisis  or  industrial  depression  the 
mediocre  working  men  and  women  are  the  first  to  be  dis- 
missed. In  individual  cases  it  is  often  difficult  to  determine 
if  poverty  is  the  result  of  idleness,  or  idleness  the  result  of 
poverty.  In  this  connection  the  portion  of  the  report  of  the 
commission  of  inquiry  dealing  with  the  condition  of  the  un- 
employed in  Basle  is  specially  instructive.  In  the  Canton 
of  Basle  the  work  for  the  amelioration  of  the  condition  of 
the  unemployed  assumed,  to  a  large  extent,  the  character  of 
charitable  relief,  "as  among  those  registered  there  were  many 
cases  in  which  it  was  difficult  to  determine  if  the  straits  in 
which  the  workers  found  themselves  should  be  attributed  to 
lack  of  employment  or  general  poverty  caused  by  a  large 
number  of  children,  intemperate  habits,  laziness  or  unfitness 
for  work."  This  interdependence  of  lack  of  work  and  pov- 
erty is  empha'sized  by  the  facts  contained  in  the  Basle  re- 
port: "that  among  the  unemployed  there  is  a  regular  clien- 
tele without  work  a  greater  part  of  the  time  as  well  as  a 
large  number  who,  while  receiving  the  help  on  account  of 
such  condition,  are  also  the  recipients  of  charitable  relief 
through  the  ordinary  channels." 

Insurance  for  the  unemployed  is  about  fifteen  years  old. 
Up  to  that  time  the  interdependence  of  poverty  and  lack  of 
work  was  considered  axiomatic  as  a  condition  which  could 
not  be  avoided  by  any  assistance  towards  self-help.  Private 
charity  supplemented  public  relief  and  where  these  ended 
the  church  and  the  province  bore  the  burden,  or  various  re- 
ligious organizations  created  work  for  the  unemployed  dur- 
ing times  of  greatest  depression.  In  a  number  of  German 
states  the  acceptance  of  public  relief  made  the  situation  even 


244  SELECTED  ARTICLES 

more  oppressive  as  the  forfeiture  of  certain  political  rights 
was  one  of  the  conditions  imposed.  Co-incident  with  the 
beginnings  of  the  labor  organizations  about  1890,  the  views 
of  the  workingmen  on  these  questions  underwent  a  change. 
In  the  struggle  for  political  rights  they  felt  these  conditions 
particularly  oppressive,  which  caused  them  to  lose  part  of 
such  rights,  if  by  reason  of  undeserved  loss  or  lack  of  em- 
ployment they  became  dependents  on  charity  or  if  they 
were  compelled  to  join  the  ranks  of  the  poor  for  whose  sup- 
port the  public  made  itself  responsible.  From  the  point  of 
view  of  the  workingmen,  it,  was  the  duty  of  the  state  to  pro- 
vide work  in  case  of  enforced  lack  of  employment  or  to 
support  the  unemployed.  In  Switzerland  they  even  made  a 
formal  but  unsuccessful  demand  upon  the  government  for 
the  recognition  of  this  principle. 

The  formation  of  a  system  for  securing  emploj-ment  was, 
therefore,  the  first  move  of  organizations  beyond  the  mere 
giving  of  relief.  During  the  past  fifteen  years  Germany  has 
witnessed  a  development  in  this  direction  which,  though  in- 
complete and  insufficient  still,  goes  much  further  than  it  was 
thought  possible  at  the  beginning  of  the  movement;  as  on 
one  side  through  the  public  agencies  the  conditions  of  en- 
forced idleness  are  being  met  by  organized  systems  of  se- 
curing work,  so  on  the  other  hand  the  system  of  self-help 
has  been  inaugurated  by  the  labor  organizations  through 
which  the  workingmen  support  such  of  their  own  number 
as  are  unemployed.  Although  at  its  inception  this  work  was 
started  from  a  purely  charitable  point  of  view,  it  gradually 
became  evident  that  the  support  of  the  men  out  of  work  not 
only  helped  the  unemployed  but  also  reacted  to  the  advan- 
tage of  others  who  had  employment,  as  the  unemployed  men 
no  longer  underbid  the  actual  workers  in  the  labor  market. 
It  was  also  demonstrated  that  it  was  a  valuable  instrument 
in  furthering  the  workingman's  policy  of  maintaining  the 
standard  of  living.  This  form  of  self-help  owes  its  develop- 
ment during  the  last  ten  years  to  the  recognition  of  its  value 
as  an  economic  factor,  which  is  evidenced  by  the  fact  that  in  , 
1904  the  English  labor  unions  spent  three  and  one-half  mil- 


COMPULSORY  IXSURAXCE  '  245 

lion  dollars  and  the  German  labor  organizations  about  half 
a  million  dollars  for  the  support  of  the  unemployed. 

The  \vorkingmcn  and  the  public  agencies  simultaneously 
attacked  the  problem  of  separation  between  help  for  the  un- 
employed and  the  care  of  the  poor.  Assistance  given  as 
charitj^  was  refused  by  the  workingmen  in  cases  of  enforced 
idleness,  and  a  strict  separation  was  demanded  between  assis- 
tance required  by  reason  of  lack  of  means  and  such  support 
of  the  unemployed  as  would  prevent  poverty  taking  root. 
The  giving  of  alms  was  rejected  as  a  solution  of  the  prob- 
lem and,  in  consequence,  ideas  crystallized  themselves  in  a 
demand  for  a  system  of  public  insurance  for  the  unemployed 
which  would,  in  conception  and  in  fact,  most  strictly  sepa- 
rate itself  from  the  common  forms  of  charitable  relief. 

In  recognition  of  this  fact  all  further  development  re- 
jected any  semblance  of  relief  and  to-day  in  practice  the  two 
divisions  are  very  sharply  dififerentiated.  On  the  one  side 
there  are  the  unorganized  workmen  who  possess  neither  the 
initiative  nor  the  capability  to  subscribe  to  the  treasuries  for 
the  unemployed,  and  who  are  therefore  the  first  to  become 
the  victims  of  charity  in  case  the  effort  to  secure  work  for 
them,  or  to  put  them  in  the  way  of  finding  it  proves  unsuc- 
cessful. On  the  other  side  are  the  organized  workmen  who 
help  themselves  either  through  their  unions  or  as  subscribers 
to  funds  for  the  unemployed,  and  who  strictly  avoid  com- 
munication with  ordinary  relief  agencies. 

Mixed  forms  of  relief-giving  as  practiced  by  the  Basle 
Commission  for  the  Unemployed  are  regarded  as  an  unfor- 
tunate solution  of  the  difficulty  even  by  those  participating, 
and  the  report  of  this  commission  makes  it  plain  that  abso- 
lute separation  is  now  demanded  so  that  insurance  for  the 
unemplo3'ed  and  the  giving  of  charity  shall  have  no  connect- 
ing link. 

In  contra-distinction  to  public  relief-giving  in  Germany, 
we  can  cite  but  one  positive  factor  giving  the  figures  for  the 
relief  of  the  unemployed  as  distributed  by  the  labor  organi- 
zations which  in  1904  disbursed  about  half  a  million  dollars 
and   during   1905   these   figures,   together  with   travelling  ex- 


246  SELECTED  ARTICLES 

peases,  reached  $750,000.00.  It  is  true,  however,  that  this 
comparison  is  not  altogether  reliable.  The  care  of  the  poor 
and  the  expenditure  required  for  the  purpose  necessarily  deal 
largely  with  the  solution  of  the  problem  which  must  remain 
within  the  province  of  relief-giving,  even  in  the  complete  at- 
tainment of  a  satisfactory  system  of  insurance  for  the  imem- 
ployed.  The  sick  poor,  families  of  habitual  drunkards  or 
those  with  an  unusually  large  number  of  children,  homes 
left  destitute  by  the  death  of  the  bread  winner,  the  burial  of 
the  dead,  and  similar  cases  are  all  problems  that  go  much 
further  than  the  confines  of  relief  for  the  imemployed  even 
when  drawn  as  wide  as  possible.  It  is  useful,  however,  to 
know  how  large  a  field  must  remain  in  any  case  for  charity 
and  poor-relief,  so  that  the  knowledge  of  these  difficulties 
will  assist  in  bounding  any  scheme  for  carrying  out  a  system 
of  insurance  for  the  unemployed. 

In  the  presentation  of  the  conclusions  reached  b\'  the 
official  report  in  the  Xational  Labor  Journal,  the  solutions 
hitherto  tried  in  the  field  of  insurance  for  the  imemployed 
are  divided  into  four  groups;  self-help,  obligatory  insurance, 
facultative  insurance,  and  assistance  to  self-help  from  public 
funds  under  conditions  requiring  the  forfeiture  of  private 
insurance.  These  divisions  as  made  in  the  official  report, 
are  also  useful  as  a  guide  to  their  final  consideration. 

Obligatory  insurance  is  the  only  one  which  does  away 
with  initiative  and  replaces  it  by  compulsion.  It  premises 
experience  to  show  that  the  workman  does  not  provide  for 
times  of  enforced  idleness,  either  because  he  is  not  in  a  posi- 
tion to  do  so  or  because  of.  neglect.  Compulsion  in  this 
direction  is  the  foundation  of  the  other  great  German  labor 
insurance  organizations,  and  it  is  therefore  probable  that  all 
projects  through  which  an  attempt  is  being  made  to  solve 
the  question  are  more  or  less  committed  to  the  idea  of 
obligatory  insurance.  The  difficulties  which  face  an  obliga- 
tory solution  through  the  labor  organizations  are  only  com- 
paratively larger  than  those  to  be  found  in  other  forms  of 
insurance. 

It  requires  a  considerable  measure  of  foresight  to  partici- 


COMPULSORY  INSURANCE  247 

pate  in  a  facultative  workingnian's  fund  requiring  regular 
payment  of  dues  for  the  support  of  the  organization  in  addi- 
tion to  the  payments  necessary  to  carry  out  the  work  of 
self-help.  This  measure  of  efficiency,  foresight  and  initia- 
tive vv^ill  always  be  present,  at  least  to  a  limited  extent,  even 
though  no  difficulties  face  the  organizations  in  securing  the 
opportunities  for  self-help.  It  is  to  be  presumed  that  every 
indication  of  growth  on  the  part  of  the  organization  will 
show  a  corresponding  growth  in  the  development  of  the 
methods  of  self-help. 

The  growth  of  the  organization  will  be  governed  to  only 
a  small  extent  by  the  giving  of  public  subsidies.  In  the  main 
it  is  dependent  upon  other  factors  but  with  no  closer  con- 
nection with  the  question  of  insurance  for  the  unemployed, 
thereby  indicating  the  narrow  limitations  of  a  system  which 
would  attempt  to  solve  this  question  by  subsidizing  the 
methods  of  self-help,  inaugurated  by  the  working  classes. 
Under  these  systems  of  self-help  aid  is  given  only  to  those 
who  by  participation  are  already  helping  themselves,  and  not 
to  those  who  do  not  help  themselves  and- who  have  no  power 
to  do  so.  All  of  these  solutions  leave  these  classes  to  be 
dealt  with  first  and  last  by  systems  of  charity  and  poor  re- 
lief. The  greatest  efficiency  is  therefore  reached  by  obliga- 
tory insurance,  as  it  is  far  more  reaching  in  its  effect,  al- 
though its  execution  presents  the  most  difficulties,  due  to  the 
fact  that  the  determination  of  the  worthy  unemployed  is 
particularly  difficult,  as  in  practice  it  is  complicated  by  the 
fact  that  the  deserving  man  not  being  indicated  by  any  out- 
ward sign,  requires  special  investigation. 

Public  insurance  for  the  unemployed  should  and  would 
generally  insure  only  against  involuntary  and  undeserved  lack 
of  employment  on  the  part  of  efficient  rnen  caused  by  ab- 
sence of  work.  This  system  would  by  no  means  insure 
against  every  lack  of  employment.  It  would  only  protect 
against  that  which  is  dependent  upon  industrial  conditions 
and  not  upon  personal  disposition,  dealings  or  expression  of 
opinion  on  the  part  of  the  individual  who  is  unemployed. 
Upon  the  proportion  to  which  this  may  be  proven  depends 
the  right  to  assistance. 


248  SELECTED  ARTICLES 

The  aim  of  this  insurance  is  accomplished  when  the  in- 
dividual is  directed  towards  suitable  employment,  and  the 
proof  of  undeserved  lack  of  employment  on  the  part  of  the 
man  who  is  worthy  of  assistance  is  his  acceptance  of  this 
work. 

As  standards  are  in  a  large  measure  a  matter  of  dispute, 
a  consistent  determination  ■  of  the  beginning,  duration  and 
end  of  a  period  of  lack  of  employment,  having  a  depressing 
effect  upon  industrial  conditions,  is  difficult  in  the  case  of 
each  workman,  as  these  standards  are  not  always  outward- 
ly recognizable,  and  although  the  control  which  obligatory 
insurance  gives  operates  through  general  conditions,  it  still 
exercises  an  unusually  large  influence  in  the  individual  cases. 

Insurance  for  the  unemployed  is  differentiated  from  other 
forms  of  insurance  in  that  it  would  not  operate  in  occasional 
instances  but  only  to  meet  an  industrial  condition  affecting 
the  mass,  and  although  this  makes  it  easier  to  determine  the 
exact  time  when  actual  lack  of  work  begins,  it  makes  the 
control  of  its  duration  and  its  end  more  difficult  as  the  im- 
portant thing  to  be  guarded  against  in  obligatory  insurance 
is  that  it  shall  not  become  an  incentive  to  simulation  and  de- 
ceit on  the  part  of  the  lazy  and  inefficient  at  the  expense  of 
the  industrious  and  efficient. 

This  suggests  what  it  might  mean  in  Berlin  when,  even 
at  a  moderate  estimate  (using  but  one-half  of  the  figures  of 
1902,  taken  under  an  unfortunate  combination  of  circum- 
stances) it  would  be  necessary  to  exercise  daily  control  over 
30,000  unemployed,  to  know  their  identity  and  their  second- 
ary occupations  and,  in  addition,  whether  suitable  work  could 
or  could  not  be  found  for  each  one  of  them.  If  in  your  con- 
ception of  workingmen's  insurance  you  take  in  the  entire 
laboring  population  so  as  to  include  women  and  those  who 
work  at  home,  the  problem  of  control  increases  in  the  same 
ratio.  The  control  is  unequal  to  the  burdens  to  be  put  upon 
it.  Even  if  it  can  be  exercised  over  the  enormous  area 
reached  by  the  employment  bureau,  which  is  not  at  all  cer- 
tain, it  still  does  not  indicate  anything  which  could  be  taken 
as   definitely  indicating  the   real  existence  of  a  condition  of 


\ 


COMPULSORY  INSURANCE  249 

lack  of  work.  To  be  complete  this  control  would  have  to  be 
exercised  through  supervision  outside  the  usual  channels  and 
in  the  home,  which  could  hardly  be  carried  out  practically 
and  against  which  the  workmen  themselves  would  protest. 
Where  there  is  no  bureau  for  finding  work  this  supervision 
soon  reaches  its  limit. 

For  the  same  reasons  supervision  of  workmen  in  the 
same  trade  is  inefificient  in  places  where  there  are  no  organi- 
zations whatever,  and  in  the  case  of  unorganized  men  who 
are  here  to-day  and  gone  to-morrow. 

This  solution,  which  in  itself  seems  to  be  the  most  effi- 
cient, has  therefore  to  overcome  many  internal  difficulties  in 
the  matter  of  supervision,  in  compelling  the  acceptance  of 
work  and  in  deciding  upon  requests  for  assistance.  It  has 
only  been  tried  once  in  St.  Gall,  and  there  it  failed  probably 
through  insufficient  organization,  but  certainly  because  of 
the  innate  difficulties  bound  up  with  its  operation  and  indicat- 
ed in  this  statement. 

This  situation  appears  to  show  that  the  carrying  out  of  a 
system  of  obligatory  insurance  is  accompanied  by  the  maxi- 
mum number  of  difficulties,  and  that  other  solutions  are  only 
possible  where  self-help  has  already  assisted  or  has  at  least 
made  a  beginning  in  that  direction,  and  we  are  still  faced  by 
the  problem:  How  is  it  possible  to  replace  the  giving  of 
charity  and  poor  relief  where  the  individual  initiative  neces- 
sary to  make  provision  for  the  future  is  wanting? 

An  illustration  of  the  significant  results  obtained  bj^  the 
employment  bureau  is  furnished  by  the  Cologne  Unemployed 
Insurance  Fund,  whose  bureau  has  succeeded  in  providing 
almost  every  member  who  got  out  of  work  with  permanent 
or  temporary  employment.  In  the  year  1905-6,  1,087  mem- 
bers of  this  fund,  74  3/10  per  cent  of  the  membership,  were 
out  of  work.  Of  these  123  received  permanent  work  during 
waiting  time  and  902  received  temporary  occupation,  so  that 
only  41  of"  those  insured  remained  without  work  during  the 
entire  time  under  discussion,  and  the  fund  was  compelled  to 
pay  for  only  13,414  unemployed  days,  whereas  the  claims  of 
the   insured,  had  the  employment  bureau  not   secured  work 


2SO  SELECTED  ARTICLES 

for  them,  would  have  covered  42.128K'  days.  The  results  of  . 
the  work  of  this  employment  bureau  lightened  the  burden  of 
the  fund  by  two-thirds,  a  proof  that  insurance  for  the  un- 
employed cannot  be  separated  from  the  finding  of  employ- 
ment, and  that  the  building  up  of  the  employment  bureau  is 
of  the  utmost  importance  not  only  in  any  system  of  insur- 
ance but  in  dealing  with  the  entire  question  of  the  unem- 
ployed. 

The  programs  that  have  been  worked  out  for  the  German 
empire  by  the  scientists  and  other  interested  students  almost 
all  include  either  self-help  and  its  subsidization  or  obligatory 
insurance.  Facultative  insurance  for  the  unemployed  is  not 
considered  as  a  universal  solution  of  the  problem.  The 
schemes  of  Elm  and  the  C'orrespoiiden::-blatt  der  Gezverk- 
schafteii  include  the  first  principle,  while  those  of  Lischen- 
duerfer,  Herkner,  Zacher,  Buschmann,  Molkenbuhr  and  Son- 
nermann  accept  the  obligatory  principle.  Doctor  Freund, 
Fanny  Imle  and  Berndt  recommend  a  middle  course. 

Insurance  for  the  sick  is  necessarily  local  in  its  applica- 
tion. In  Germany  it  is  made  up  in  round  numbers  of  23,000 
separate  funds  and  this  minute  sub-division  causes  it  to  ap- 
pear unsuitable  for  service  in  the  field  required  by  the  unem- 
ployed. 

Likewise,  although  accident  insurance,  as  a  special  quali- 
fication, has  association  with  the  workmen  whom  it  covers, 
it  nevertheless  is  organized  upon  a  local  foundation,  and, 
with  the  method  governing  the  composition  of  its  directorate, 
it  could  not  be  easily  handled  so  as  to  form  a  useful  addition 
to  a  system  of  insurance  for  the  unemployed.  Invalid  and 
old  age  insurance  misses  every  intrinsic  relation  to  the  work- 
man without  which  any  insurance  for  the  unemployed  seems 
very  difificult  of  accomplishment. 

The  result  does  not  seem  any  more  hopeful  in  this  direc- 
tion, if  we  take  into  consideration  the  fact  that  these  sys- 
tems were  called  into  being  in  their  time  for  the  purpose  of 
satisfying  totally  dififerent  needs,  and  that  their  use  in  the 
insurance  under  consideration  would  be  like  grafting  a  new 
flower  on  an  old  tree.     Apparently  the  question  of  insurance 


COMPULSORY  IXSURAXXE  251 

for  the  unemployed  will  be  handled  internationally  in  the 
most  diverse  ways.  France  and  Norway  have  taken  the 
lead,  and  in  Denmark  definitely  formulated  propositions  are 
under  consideration.  On  the  other  hand  Belgium  and  Swit- 
zerland have  held  themselves  aloof,  while  in  England  the 
procedure  is  in  another  direction.  Holland  is  trying  some 
forms. 

The  question  will  apparently  be  a  live  one  during  the 
next  decade  and  every  contribution  to  its  classification  will 
make  its  solution  easier. 


Living  Age.  268:  443-5.  February  18,  19 11. 

Insurance  Against  Unemployment. 

Of  all  the  diseases  that  are  being  slowly  but  surely  iso- 
lated, treated  and  stamped  out  there  is  none  so  infectious  as 
the  evil  of  unemployment  that  falls  like  a  plague  upon  the 
nation  once  in  six  or  seven  years.  In  one  trade  work  is  slack, 
a  few  men  are  turned  off;  forthwith  another  trade  follows, 
and  then  begins  a  period  of  short  time,  distress,  unemploy- 
ment mounting  up  to  8  or  9  per  cent.;  an  epidemic  truly, 
whereof  gaunt  cheeks,  dull  eyes,  and  shattered  humanity  in- 
festing every  street  are  the  visible  results.  Now  a  recurrent 
epidemic  infecting  9  per  cent,  of  the  population  is  one  that 
cries  aloud  for  treatment,  drastic  treatment  inspired  by  com- 
i^on  sense.  The  thing  is  infectious,  in  very  truth;  the  source 
of  one  case  of  unemployment  can  be  found  in  the  distress  of 
others  as  certainly  as  measles  can  be  traced  to  contamination 
from  a  neighbor's  disease.  An  obvious  instance  is  that  of  the 
small  shopkeeper  in  a  neighborhood  where  employment  is 
bad,  but  the  evil  cannot  stop  with  him.  The  tradesman  who 
supplies  him,  the  manufacturer  of  his  wares,  it  may  be  at  the 
other  end  of  England,  and  the  operatives  employed  by  all  of 
them  suffer  in  greater  or  less  degree  because  trade  is  bad 
in  the  shipyards  of  Sunderland  or  the  coal  mines  of  Wales. 
The  bootmaker  who  is  unemployed  ceases  to  buy  clothes 
needed  by  his  family,  and   the  clothier  next  door  is  out  of 


252  SELECTED  ARTICLES 

work  in  consequence.  The  baker,  who  serves  both,  suffers 
in  pocket  and  in  larder;  indeed  the  shoeing  of  his  children 
must  be  postponed,  and  the  boot  trade  suffers  again  by  their 
distress.  So  the  thing  grows  and  spreads  in  ever-widening 
circles,  till  from  some  countervailing  cause  the  plague  is 
stayed. 

The  problem  of  economic  health  is  to  isolate  and  deal 
with  the  earliest  case,  with  a  view  not  only  or  even  mainly 
to  mitigate  the  sufferings  of  the  individuals  affected,  but  to 
circumscribe  and  stamp  out  the  evils  from  which  they  suffer. 
A  properly  devised  scheme  of  compulsory  insurance  against 
unemployment  should  be  a  means  to  both  ends,  meriting 
support  for  reasons  by  no  means  sentimental.  It  is  no  more 
sentimental  to  seek  an  efficient  remedy  for  unemployment 
than  it  is  to  build  a  fever  hospital,  and  it  is  just  as  necessary. 
Unemployment  is  infectious. 

Compulsory  insurance  can  obviously  do  something  to 
alleviate  the  hardships  from  which  invididuals  suffer.  We 
believe  that  it  can  do  much  more,  and  be  a  most  active 
agent  in  the  prevention  of  unemployment  itself.  If  the  bene- 
fits suffice  to  enable  the  man  who  has  lost  his  job  to  keep 
his  place  in  the  ranks  of  the  consumers,  to  pay  his  daily  visit 
to  the  corner  shop,  to  add  his  quota  to  the  demand  for  labor, 
the  factor  that  makes  for  the  spread  of  unemployment  is 
eliminated;  the  unemployed  is  no  longer  a  danger  to  his 
neighbor.  But  it  is  useless  to  blink  the  fact  that  an  ill-con- 
ceived insurance  scheme  may  be  as  potent  for  evil  as  a  well- 
drawn  one  for  good.  If  it  should  get  about  that  a  man*s 
subsistence  is  guaranteed  whether  he  works  or  no — that  it  is 
as  profitable  to  sit  at  home  in  enjoyment  of  a  public  dole  as 
to  tramp  the  streets  in  search  of  work — then  the  numbers 
of  the  unemployed  will  grow  not  less  but  more  as  the  condi- 
tions of  unemployment  become  less  arduous  and  painful. 
Failing  sufficient  safeguards,  the  wastrel  can  wreck  an  in- 
surance scheme  as  he  has  wrecked  most  of  the  projects  de- 
vised by  the  wit  of  man  for  the  benefit  of  honest  workers. 

The  true  test  by  which  the  proposals  of  the  Government 
must  be  judged  is   whether  they  bid   fair   on  the  whole  to 


COMPULSORY  INSURANCE  25j. 

reduce  unemployment.  If  they  contain  no  protection  against 
the  wastrel,  if  they  offer  temptations  to  the  shirker,  they  will 
do  more  harm  than  good.  Unfortunately  there  will  be  many 
influence.s  brought  to  bear  upon  the  Government  to  demoral- 
ize the  Bill,  influences  of  peculiar  weight  with  a  politician 
who  claims  to  be  the  child  and  darling  of  the  people.  The 
question  of  contribution  by  the  workman  and  the  question 
of  discrimination  between  applicants  for  benefit  are  those 
on  which  the  merits  of  the  Bill  will  turn. 

It  is  of  vital  importance  that  the  worker  should  himself 
contribute  to  the  insurance  fund,  partly  because  unemploy- 
ment loses  its  most  demoralizing  effect  upon  the  man  who 
drawing  his  benefit  can  say  "I've  always  paid  my  money 
honest."  He  handles  his  tools  the  better  when  fortune  calls 
on  him  to  take  them  up.  Contribution  will  also  create  and 
maintain  a  strong  public  opinion  against  shirking  and  draw- 
ing benefits  without  good  cause.  The  worker  will  feel  the 
loafer  on  his  back,  a  different  thing  from  knowing  him  to 
live  upon  the  spoils  of  the  Egyptians;  he  may  even  come  to 
realize  that  his  own  faculty  of  sticking  to  his  last  means  in 
the  end  a  reduction  in  his  premiums.  Yet,  if  there  is  any- 
thing certain  in  politics,  it  is  certain  that  no  Insurance  Bill 
will  go  through  Parliament  without  some  protest  against  the 
contributory  system,  and  every  man  or  Minister  who  votes 
in  favor  of  contribution  by  the  workers  will  know  that  he 
must  suffer  for  it  at  the  polls;  the  opinions  of  the  electorate 
are  more  sentimental  than  sound.  But  the  duty  of  the 
Unionist  party  is  plain.  We  believe  in  compulsory  insurance 
against  unemployment;  we  believe  that  it  may  prove  much 
more  far-reaching  in  its  good  effect  than  is  generally  sup- 
posed; but  we  hold  it  essential  that  it  should  be  enforced  by 
a  measure  framed  on  right  lines,  and  maintained  on  those 
lines  in  spite  of  all  the  forces  that  unreasoning  sentimental- 
ism  can  bring  to  bear  on  it. 

The  gravest  danger  is  lest  a  Government  insurance  policy 
should  prove  an  endowment  policy  for  the  wastrel.  It  must 
be  secured  that  benefits  shall  be  paid  only  to  the  man  who  is 
willing  to  work.     So  long  as  the  labor  exchanges  are  in  a 


254  SELECTED  ARTICLES 

position  to  offer  a  man  work  at  his  own  trade  and  at  standing 
wages  the  solution  is  simple:  he  will  get  no  benefit  by  re- 
fusal. Nor  is  the  problem  more  subtle  when  the  labor  ex- 
change has  no  work  to  offer:  prima  facie  every  insured  person 
out  of  work  is  entitled  to  benefit.  In  either  case  benefits 
should  be  paid  at  the  labor  exchange,  and  stopped  so  soon  as 
proper  work  is  offered.  The  critical  point  is  reached  when 
the  labor  exchange  can  offer  work,  but  of  a  grade  inferior 
to  that  for  which  the  applicant  is  qualified.  Is  a  skilled  me- 
chanic to  be  entitled  to  benefit  after  refusing  the  office  of  a 
laborer?  If  nay,  he  becomes  a  laborer,  and  probably  re- 
mains one;  if  yea,  where  is  the  line  to  be  drawn?  Down 
how  many  steps  in  the  subtle  gradation  of  the  labor  hierarchy 
shall  a  man  be  required  to  move?  Can  a  cabinet-maker  re- 
fuse joiner's  work,  or  a  joiner  draw  benefits  while  carpenters 
are  in  demand?  Either  these  questions  must  be  settled  by 
the  Act,  or  courts  like  the  Gewerbegericht  of  Germany  must 
be  appointed  to  assess  the  dignities  of  craftsmen. 

One  evil  is  bej^ond  the  reach  of  any  insurance  scheme; 
the  old,  overwhelming  one  of  casual  labor,  of  the  men  who 
are  never  fulh'  employed  and  seldom  quite  without  employ- 
ment. Men  on  the  "B"  lists  at  the  wharves  and  docks,  who 
work  with  a  kind  of  regularity  for  one  or  two  employers, 
may  probably  be  reached;  men  on  the  "C"  lists  are  more 
difficult;  and  the  man  who  carries  your  bag  for  sixpence  is 
impossible.  The  problem  bristles  with  difficulties,  and  the 
Government  if  it  shows  any  mind  to  deal  with  them  seriously 
will  have  no  difficulty  with  the  Opposition.  Is  it  Quixotic 
to  hope  for  something  better  from  Mr.  Lloyd  George  than 
a  demonstration  of  the  art  of  vote-catching?  He  can  so 
frame  his  scheme  that  the  Opposition,  if  honest,  must  criti- 
cize it  and  try  to  amend  it.  Then  it  will  be  possible  to  pa- 
rade at  the  next  election  all  these  votes  or  amendments  or 
both  against  the  Bill.  The  Old-age  Pension  Bill  has  shown 
how  it  can  be  done.  The  Opposition  will  want  evidence  as 
well  as  honesty.     They  need  not  play  into  the  enemy's  hands. 


CO^IPULSORY  INSURANCE  255 

Spectator.   102:  807.  May  22,  1909. 

Compulsory   Insurance   Against   Unemployment. 

The  most  important  dangers  against  which  the  Govern- 
ment will  have  to  take  thought  are  those  of  human  nature. 
There  is  a  type  of  man  who  would  rather  be  out  of  work 
with  a  small  sum  to  live  on  than  in  work  with  considerably 
more.  He  himself,  in  his  too  ample  leisure,  may  pick  up 
enough  to  eat,  drink,  and  smoke  to  satisfy  himself;  but  his 
wife  and  children  at  home  are  in  a  very  different  case,  and  if 
the  State  made  it  easier  for  that  type  of  man  to  follow  his 
inclinations  it  would  in  efifect  be  facilitating  cruelty  to  chil- 
dren and  wives.  The  more  a  man  is  guaranteed  in  the  event 
of  unemployment,  the  more  he  is  tempted  to  drop  out  ot 
work.  All  temptation  to  do  so  is  absent  when  the  alterna- 
tive is  between  comfort  and  nothing.  These  are  the  reasons 
why  we  have  urged  before  now  that  the  benefits  from  any 
unemployment  insurance  scheme  should  be  small,  and  that 
they  should  be  combined  with  insurance  against  sickness,  old 
age,  and  death.  A  man  thinks  twice  before  laying  up  for  him- 
self a  pauper's  old  age  bj^  drawing  on  his  savings.  We  recog- 
nise fully  the  hard  lot  of  the  man  who  is  thrown  out  of  work 
through  no  fault  of  his  own,  and  we  would  do  everything 
humanly  possible  to  help  him.  Even  where  a  man  has  been 
too  careless  to  save,  although  he  is  a  good  and  regular  work- 
man, it  is  possible  that  the  punishment  of  the  workhouse  for 
him  and  his  family  is  too  severe  for  the  fault.  But  the  fatal 
objection  to  most  insurance  schemes — certainly  to  every  So- 
cialistic scheme  that  ever  we  heard  of — is  that  they  tax  the 
prudent  for  the  advantage  of  the  imprudent.  That  is  abom- 
inably wrong,  and  we  could  never  willingly  consent  to  it. 
We  agree  to  the  principle  of  compulsion  in  insurance  so 
that  men  may  be  saved  in  spite  of  themselves;  but  how  are 
we  to  prevent  the  thriftless  from  battening  on  the  careful 
in  the  process.  We  must  remember  that  even  in  Trade- 
Unions  men  sometimes  draw  out-of-work  pay  unfairly.  If 
this  is  possible  in  Unions  where  the  men's  circumstances  are 
fairly  well  known,  what  would  happen  when  they  had  to  deal 


2s6  SELECTED  ARTICLES 

with  the  quite  impersonal  organisations  of  the  State?  The 
test  of  unemployment  will  be  very  difficult  to  apply.  The 
remedy  we  propose  is,  as  we  have  just  said,  not  only  that 
the  payments  should  be  small,  but  that  they  should  be  com- 
bined with  insurance  against  sickness,  old  age,  and  death. 
We  are  glad  to  see  that  the  Government  mean  to  organise 
the  insurance  by  trades.  This  ought  to  mean  that  the  in- 
surance will  be  an  extension,  not  a  reversal,  of  the  excellent 
arrangements  already  made  by  the  Unions.  If  the  payments 
under  compulsory  insurance  are  moderate,  men  will  be  en- 
couraged to  remain  members  of  their  Unions.  This  is  in 
every  way  to  be  desired.  The  new  scheme  would  be  con- 
demned if  it  proved  to  be  a  vampire  to  the  Trade-Unions, — 
institutions  the  country  may  be  proud  of,  and  which  ought 
to  be  kept  in  unimpaired  vitality.  Under  a  good  scheme 
there  would  be  no  need  for  a  State  subsidy  whatever.  Each 
trade  would  be  responsible  for  its  own  insurance  fund.  Fin- 
ally, we  hope  that  Parliament  will  never  consent  to  vest 
such  State-delegated  authority  in  the  hands  of  the  Unions, 
indirectly  or  directly,  that  workmen  will  find  it  humanly  im- 
possible to  live  or  flourish  outside  the  Unions.  Personally, 
we  think  a  man  is  probably  unwise  who  can  belong  to  a 
Union  and  does  not  do  so.  But  here,  as  in  all  circumstances, 
tyranny  is  intolerable.  Men  must  neither  be  bribed  nor 
browbeaten  into  joining  the  Trade  Societies. 

Scribner's  Magazine.  49:  116-20.  January,  191 1. 

Experiments   in   Germany  with   Unemployment   Insurance. 
Elmer  Roberts. 

Political  thinking  in  Germany,  beginning  with  the  later 
Bismarckian  days,  abandoned  the  idea  that  the  individual 
alone  is  responsible  for  his  situation  in  life,  his  employment 
or  unemployment,  and  that  somehow  inwoven  with  indi- 
vidual responsibility  is  the  responsibility  of  society,  of  the 
whole  state.  This  way  of  thinking  may  now  be  called 
the  minimum  German  state  socialism,  the  kind  of  think- 
ing that  is  still  called  radical  in  Great  Britain  or  in  America, 


COMPULSORY  INSURANCE  257 

but  in  Germany  is  conservative.  It  became  evident  to  ob- 
servers that  the  loss  of  employment  in  industrial  crises  was 
brought  about  by  events  over  which  the  workman  could 
have  no  control.  Besides  periodical  depressions,  the  develop- 
ment of  immense  organizations,  formerly  unknown,  in  the 
management  of  which  the  individual  workman  docs  not  par- 
ticipate and  in  which  there  can  be  no  direct  bargain  between 
the  managing  employer  and  the  employed,  has  brought 
economists  and  the  paternal  governments  of  German  states 
to  the  conviction  that  the  state  or  the  local  government 
must  justly  share  responsibily  for  unemployment  and  must 
devise  measures  for  the  creation  of  a  fund  out  of  which  the 
unemployed  may  of  right  take  assistance.  The  government 
has  therefore  in  the  course  of  the  last  twenty-five  years 
abandoned  the  stand-point  of  the  imperial  industrial  laws 
guaranteeing  complete  liberty  of  action  between  the  giver  of 
labor  and  the  applicant,  and  has  undertaken  to  intervene  by 
a  policy  of  protection.  This  policy  of  protection  for  the 
emploj^ee  runs  parallel  with  protection  of  agriculture,  of 
internal  trade,  of  foreign  commerce,  and  through  an  intri- 
cate system  of  adjustments,  between  all  individuals  whether 
great  capitalists  or  small  workmen,  and  the  economic  whole. 
It  has  been  therefore  an  easy  question  to  dispose  of,  wheth- 
er public  funds  should  be  used  in  insurance  against  the  re- 
sults of  unemployment.  The  majority  of  those  deliberating 
upon  the  question  in  municipal  councils  or  in  state  commis- 
sions have  decided  that  such  application  of  government 
funds  is  correct  in  principle. 

The  trying  to  think  out  and  experiment  with  insurance 
against  the  results  of  intermittent  employment  is  a  continu- 
ance by  German  cities  and  the  governments  of  German 
states  of  the  striving  to  squeeze  dependent  pauperism  out 
of  the  social  system,  to  round  out  the  imperial  insurances 
begun  in  the  eighties  for  the  widow,  the  ill,  the  aged,  the 
orphan,  and  the  disabled.  Since  the  state  enforces  compul- 
sory education,  military  service,  and  precautions  for  the 
health  of  the  workman,  it  is  regarded  as  a  proper  extension 
of  the  powers  of  government  to  prevent  the  labor  unit  from 


2S8  SELECTED  ARTICLES 

degenerating  while  temporarily  out  of  use.  He  must  be 
cared  for  and  kept  in  a  state  of  efficiency  for  re-employ- 
ment, for  the  army,  and  for  his  general  functions  as  a  living 
and  contributing  organism  of  the  state.  Neither  circum- 
stances nor  the  individual's  own  inadequate  powers  of  resist- 
ance must  be  allowed  to  transform  him  into  a  parasite.  The 
main  element  of  the  problem  is  regarded  as  psychological, 
to  maintain  the  human  unit  in.  good  condition  by  keeping  his 
spirit  in  a  healthy  state  of  self-respect  and  courage.  After 
the  old.  the  sick,  and  the  defective  have  been  sifted  from 
the  unemployed  and  cared  for  each  under  his  classification, 
and  after  the  police  and  the  magistrates  have  driven  to  forced 
labor  those  otherwise  able  yet  without  the  will  to  work, 
there  remain  the  capable  'and  the  willing  for  whom  there  is 
no  work.  Official  and  semi-official  labor  exchanges  make 
it  easy  for  the  person  who  desires  work  to  be  brought  into 
relation  with  the  person  or  company  having  work  to  give. 
But  after  all  has  been  done,  a  surplus  remains  of  workers 
over  the  amount  of  work  to  do.  The  solicitude  of  the  state 
for  the  unemployed  in  Germany  is  greater  perhaps  than 
in  most  other  countries,  because  the  imperial  policy  is  to 
make  life  at  home  easy  enough  and  endurable  enough  to 
continue  to  keep  Germans  in  Germany,  to  give  them  em- 
ployment and  a  sense  of  security  for  the  future.  The  Ger- 
man workman  does  seem  to  have  the  feeling  that  he  is  up- 
held by  the  whole  of  the  splendid  and  powerful  society  of 
which  he  is  an  obscure  member.  Life  is  dingy,  but  he  feels 
that  he  will  not  be  allowed  to  become  submerged  utterly, 
no  matter  what  calamities  may  happen  to  him  individually  or 
to  his  trade. 

Munich,  Dresden,  Cologne,  Diisseldorf,  Mayence,  Strass- 
burg,  Luebeck,  Rostock,  Karlsruhe,  Elberfeld,  Magdeburg, 
Cassel,  Altenburg,  Quedlinburg,  Erlangen,  and  Wernigerode 
are  the  principal  industrial  municipalities  that  are  operating 
some  form  of  so-called  insurance  for  unemployed. 

The  municipality  of  Cologne  has  had  since  the  autumn 
of  1896,  an  insurance  against  hardships  from  loss  of  work. 
The   administration   is   in   the   hands   of   a   committee   created 


COMPULSORY  INSURANCE  259 

by  the  municipal  council,  consisting  of  the  mayor,  the  presi^ 
dent  of  the  labor  exchange,  twelve  insured  workingmen 
elected  by  the  insured,  and  twelve  honorary  members  chosen 
from  the  long  list  of  prominent  citizens  who  are  honorary 
contributors.  The  governor  of  the  district,  who  is  an  ap- 
pointee of  the  Prussian  crown,  has  a  supervisory  relation  to 
the  committee.  The  fund  out  of  which  the  insurances  are 
paid  was  begun  by  voluntary  contributions,  amounting  to 
100,000  marks,  of  manufacturers,  other  employers  of  labor, 
and  honorary  members.  The  city  appropriated  25,000  marks. 
The  remainder  of  the  funds  during  a  period  of  thirteen 
years  since  the  foundation  has  been  raised  by  the  assess- 
ments on  insured  workingmen;  the  total  from  this  source, 
however,  amounting  to  a  little  more  than  one-third.  The 
conditions  giving  a  workman  the  right  to  participate  in  the 
insurance  are  that  he  shall  be  eighteen  years  of  age,  have 
resided  at  least  a  year  in  the  Cologne  district,  that  he  shall 
have  a  regular  calling,  and  that  he  must  have  paid  a  weekly 
contribution  of  from  thirty  to  forty  pfennigs — that  is,  seven 
and  a  half  to  ten  cents — weekly  for  a  period  of  thirty-four 
weeks.  He  then  becomes  entitled,  should  he  be  out  of  em- 
ployment during  the  winter,  from  December  i  to  March  i,  to 
be  paid  after  the  third  day  of  unemployment  two  marks  a  day 
for  the  first  twenty  days  and  one  mark  a  day  thereafter  until 
the  winter  season  shall  be  at  an  end.  As  the  imperial  govern- 
ment's laws  concerning  insurance  against  illness  or  accident 
provide  for  these  categories,  the  workman  can  only  continue 
to  receive  insurance  if  he  is  in  sound  health  and  fit  for  work. 
He  may  not  benefit  if  he  is  on  strike  or  if  he  has  been  dis- 
missed through  an  obvious  fault  of  his  own,  if  he  refuses 
work  or  has  given  false  information  regarding  himself.  The 
insurance  office  is  run  in  intimate  connection  with  the  official 
labor  exchange,  whose  duty  it  is  to  know  where  labor  is 
wanted  in  any  division  of  efifort  in  the  Cologne  district  and 
to  draw  from  the  body  of  unemployed  enrolled  at  the  ex- 
change those  suited  to  the  vacancies  that  exist.  The  insured 
are  largely  members  of  the  building  trades,  such  as  masons, 
stone-cutters,  plasterers,  papercrs,  and   carpenters.     The   re- 


26o  SELECTED  ARTICLES 

suits,  therefore,  are  not  regarded  as  representing  what  they 
would  be  were  the  insurance  to  extend  over  the  entire 
working  year  and  to  include  every  variety  of  workers.  The 
scheme,  however,  operated  sufficiently  well  to  insure  its  con- 
tinuance. The  plan  has  been  modified  in  details  from  year 
to  year,  and  has  become  adjusted  to  local  conditions.  Last 
winter  the  number  of  the  insured  was  1,957.  Of  this  number 
seventy-six  per  cent,  became  entitled  to  insurance  to  the 
extent  of  61,934  marks.  The  insured  themselves  had  con- 
tributed 23,439  marks.  The  remainder  of  the  requirements 
were  paid  out  of  the  permanent  fund,  which,  with  the  excep- 
tion of  6,000  marks,  was  restored  by  a  grant  of  20,000  marks 
from  the  city  of  Cologne  and  by  contributions  from  other 
bodies  and  persons. 

Private  persons  in  Leipsic  seven  years  ago  founded  a 
non-dividend-paying  company  with  a  reserve  of  100,000  marks 
with  the  object  of  insuring  against  unemployment.  The 
municipality  declined  to  contribute  because  of  socialist  op- 
position, based  upon  the  belief  that  insurance  enterprises  of 
this  sort  tend  to  compete  with  similar  provisions  of  the 
trades-unions,  which  pay  out  yearly  in  Germany  about  5,- 
000,000  marks  on  account  of  intermittent  employment  of 
their  members.  The  trades-union  insurance  schemes  are 
usually  solvent  and  well  managed.  The  Leipsic  concern  di- 
vides its  risks  into  four  classes.  The  members  pay  the 
equivalent  weekly  of  seven  and  one-half,  ten,  twelve  and 
one-half,  and  fifteen  cents  throughout  the  year,  the  insur- 
ance under  this  arrangement  covering  the  entire  year.  A 
special  class  has  also  been  erected  for  members  of  societies,  or 
for  entire  bodies  of  workmen  in  factories,  to  be  insured. 
The  member  is  qualified  for  receiving  1.20  marks  insurance 
per  day  after  he  has  contributed  forty-two  weeks.  The 
usual  conditions  of  non-payment  in  case  of  strike  or  refusal 
to  accept  work  or  for  incapacity  for  work  are  attached. 

The  conflict  with  the  trades-unions  has  been  overcome  in 
the  city  of  Strassburg,  by  the  municipal  government  co- 
operating with  the  trades-unions,  and  adding  one  mark  per 
day  to  the  subscription  of  two  marks  for  each  member  made 


COMPULSORY  INSURAN'CE  261 

by  the  trades-unions;  or  in  instances  where  the  payments 
of  the  trades-unions  were  less  than  two  marks,  the  city 
shares  proportionately.  This  co-operation  has  been  found 
to  work  well.  The  city  insurance  office  settles  monthly  with 
the  trades-unions.  Only  one  instance  has  been  discovered 
of  deception  on  the  part  of  a  member  of  a  trades-union  who 
was  receiving  insurance.  One  consequence  naturally  has 
been  that  the  position  of  trades-unions  has  been  strength- 
ened. The  unorganized  labor  is  taken  care  of  by  relief 
works.  In  Strassburg  as  well  as  in  other  cities,  a  close  work- 
ing arrangement  exists  between  the  insurance  office  and  the 
labor  exchanges.  The  co-operation  between  the  trades- 
unions  and  the  insurance  office  in  Strassburg,  has  had  the 
advantage  of  providing  the  insurance  office  with  accurate  in- 
formation regarding  eve-ry  person  in  receipt  of  insurance, 
and  a  system  of  control  against  deception. 

The  municipality  of  Munich  has  a  bill  under  consideration 
for  paying  three  marks  a  day  for  married  men  and  two 
m.arks  a  day  for  unmarried,  during  a  period  in  each  year  not 
exceeding  eight  weeks,  to  those  irregularly  employed.  The 
magistrates  decide  who  are  to  come  within  the  benefits  of 
the  municipal  insurance  fund,  which  is  created  by  appropria- 
tion from  the  city  treasury,  by  contributions  from  employers, 
and  by  the  subscriptions  of  public-spirited  individuals.  Diis- 
seldorf  has  spent  during  each  of  two  winters  half  a  million 
marks  in  public  relief  works.  The  twenty  or  more  other 
German  cities  that  are  experimenting  with  insurance  against 
the  loss  of  work,  are  doing  so  upon  one  or  other  of  the  lines 
already  mentioned. 

The  subject  has,  however,  taken  a  larger  form  in  German 
thought  than  the  experiments  of  municipalities,  though  these 
experiments  form  an  interesting  body  of  results.  The  broad 
aim  toward  which-  German  statesmen  are  thinking  is  the 
building  of  a  governmental  machinery  that  shall  bring  about 
compulsory  thrift  on  the  part  of  those  liable  to  unemploy- 
ment, and  the  compulsory  contribution  of  the  employer  of 
labor,  with  an  addition  by  society,  as  a  whole,  to  the  fund 
thus  created.     Employers  are  not  generally  opposed  to  such 


262  SELECTED  ARTICLES 

a  law.  Several  of  the  great  employing  companies  of  Ger- 
many have  private  systems  of  insurance;  as  for  instance, 
the  Lanz  Machinery  Company  of  Mannheim,  which  has  a 
capital  set  apart  for  the  maintenance  of  skilled  workmen  for 
whom  the  company  has  provisionally  no  employment  on  ac- 
count of  industrial  exigencies.  The  principle  upon  which 
the  Lanz  Company  and  other  companies  doing  the  same 
thing  act  is  that,  when  a  body  of  skilled  workmen  has  been 
brought  together  and  organized  with  a  highly  specialized 
division  of  labor,  the  company  would  suffer  a  greater  loss  by 
allowing  the  workmen  who  form  trained  parts  of  their  indus- 
trial machine  to  migrate  to  other  places  in  search  of  work 
than  by  paying  to  keep  them  ready  for  re-employment. 
The  Lanz  Company  also  considers  that,  as  it  employs  men 
to  the  full  capacity  of  the  works  only  during  brisk  times,  it 
is  simple  justice  to  give  these  workmen  a  share  of  the  ac- 
cumulated profits  during  slack  times.  German  companies 
acting  thus  toward  their  workmen  have  found  that  an  econ- 
omy was  effected  by  having  efficient  men  ready  to  fill  vacan- 
cies or  to  take  up  work  during  periods  of  expanding  business, 
so  that  the  full  profits  of  expansion  could  be  realized  im- 
mediately without  the  delays  that  might  otherwise  be  caused 
by  training  inexperienced  men  or  by  getting  trained  men 
from  other  localities — always  a  difficult  thing  to  do  during  a 
period  of  prosperity. 

The  Reichstag  in  1902  adopted  a  resolution  asking  the 
imperial  government  to  examine  into  the  possibility  of  in- 
surance against  unemployment.  The  government  charged 
the  imperial  bureau  of  statistics  to  inquire  into  the  subject, 
and  after  three  years  an  extensive  report  was  presented  to 
Parliament  based  upon  the  beginnings  of  the  experience  by 
German  municipalities  and  in  Switzerland  and  Belgium.  Al- 
though this  volume  was  published  only  four  years  ago,  it  is 
out  of  date  because  insurance  for  unemployment  has  made 
such  rapid  progress  that  data  has,  from  year  to  year  since 
1906,  been  so  expanded  that  anything  written  one  year  has 
become  antiquated  the  next.  Count  von  Posadowsky,  while 
he  was  imperial  minister  of  the  interior  and  vice-chancellor. 


COMPULSORY  INSURAXXE  263 

undertook  to  work  out  a  comprehensive  plan  for  the  main- 
tenance of  those  able  to  work  but  for  whom  no  work  could 
be  found.  He  gave  the  subject  much  personal  attention,  and 
the  statisticians  to  whom  he  committed  divisions  of  the  work 
brought  together  a  large  body  of  facts  and  conclusions  based 
upon  them.  The  material,  however,  could  not  be  brought 
into  a  form  satisfactory  to  the  analytical  and  comprehensive 
mind  of  Count  von  Posadowsky.  He  never  submitted  the 
results  to  the  chancellor  or  to  the  emperor.  The  main  out- 
lines within  which  Count  von  Posadowsky  undertook  to  en- 
close his  scheme  are  understood  to  have  been  compulsory 
•contributions  by  workmen  during  the  periods  of  employment, 
enforced  contributions  by  employers  graduated  according  to 
wages  and  the  character  of  the  employment,  and  proportion- 
ate contributions  from  the  imperial  finances.  A  considera- 
tion that  has  apparently  delayed  the  imperial  government  in 
pushing  forward  provisions  for  the  idle  employable  has  been 
the  position  of  the  national  finances.  The  annual  deficits, 
covered  by  annual  borrowings  on  account  of  large  expenses 
in  other  directions,  caused  the  feeling  that  fresh  obligations 
indefinitely  large  ought  not  to  be  undertaken  until  the  im- 
perial expenditures  were  balanced  by  revenue.  The  idea  of 
an  insurance  against  unemployment  on  a  scale  comprehend- 
ing the  empire  is  for  the  present  in  suspense,  but  it  is  likely 
to  be  taken  up  as  soon  as  financial  embarrassments  are  out 
of  the  way.  In  the  meantime,  the  problem  is  being  worked 
out  by  the  governments  of  German  states  and  by  municipali- 
ties. The  imperial  government  continues  to  take  censuses 
of  unemployed  and  to  make  theoretic  studies  with  the  ulti- 
mate object  of  devising  a  national  scheme. 

The  government  of  Bavaria  appointed  a  commission  in 
November,  1908,  to  discuss  public  insurance  against  results 
of  loss  of  work.  The  conference  met  the  following  March, 
and  the  principal  branches  of  industry,  agriculture,  the 
Chambers  of  Commerce,  and  the  departments  of  the  govern- 
ment were  represented.  The  propertied  interests  were  skep- 
tical regarding  the  possibility  of  an  equitable  distribution  of 
the    burdens    of    such    insurance,    while    economists    and    the 


264  SELECTED  ARTICLES 

gc^ernment  representatives  took  the  view  for  the  most  part 
that  insurance  of  this  sort  w^as  desirable,  and  that  the  difficul- 
ties could  be  overcome. 

The  statistical  results  of  German  experiments  form  al- 
ready a  literature  of  about  eighty  pamphlets  and  books — 
most  of  them  prepared  officially  by  city  statistical  offices,  or 
by  economists  and  statisticians  employed  by  municipalities 
for  the  purpose.  Nearly  all  the  material  is  accompanied  by 
discussions  that  in  themselves  indicate  how  new  the  subject 
is.  Herr  Dr.  Jastrow,  who  has  prepared  one  of  the  most 
lucid  commentaries  for  the  city  council  of  Charlottenburg, 
a  suburb  of  Berlin  with  300,000  population,  considers  that 
the  discussion  has  advanced  far  enough  for  it  to  be  regarded 
as  non-political  and  that  the  question  need  no  longer  be  dis- 
cussed as  it  was  some  years  ago  by  labelling  all  those  who 
hold  ancient  views  as  reactionaries,  and  those  who  believe  in 
such  insurance  as  radicals. 

The  main  preliminaries  which  have  been  decided  by 
municipalities  that  have  already  put  into  operation  some 
form  of  unemployment  insurance,  are  that  the  use  of  public 
money  for  this  purpose  is  admissible,  that  the  results  of 
unemployment  are  to  be  considered  in  principle  as  a  public 
matter,  and  that  it  is  technically  possible  to  provide  such 
assurance. 

Insurance  is  based  upon  statistics  that  determine  the  fre- 
quency with  which  a  risk  would  be  likely  to  avail  itself  of 
the  guarantee.  No  adequate  statistics  concerning  unemploy- 
ment, nor  long-established  systems  for  premiums  and  indem- 
nities, exist.  It  has  been  affirmed  that  the  need  for  insur- 
ance might  depend  upon  the  insured  person  himself,  and  that 
the  employed  workman  could  easily  cause  himself  to  be  dis- 
missed, so  that  he  could  receive  money  without  work.  The 
objection  has  also  been  made  that  in  other  forms  of  insur- 
ance there  can  be  a  restoration  of  the  damage  sustained, 
and  that  the  remedy  for  unemployment  ought  to  be  work 
offered,  instead  of  payments  for  not  working,  and  that  the 
question  would  still  be  open  as  to  whether  the  insured  should 
accept  work  that  might  be  distasteful  to  him.     These  objec- 


COMPULSORY  INSURANCE  265 

tions  are  considered  to-day  as  having  been  disposed  of  by 
reflections  along  this  line: 

Modern  statistics  of  unemployment  are  imperfect,  but 
life,  fire,  transport,  and  casualty  insurances  were  begun 
without  statistics,  and  created  them  only  in  the  course  of 
time.  Even  the  imperfect  statistics  of  unemployed  to-day 
are  more  adequate  as  a  basis  from  which  to  work,  Herr  Dr. 
Jastrow  says,  than  the  statistics  were  at  the  time  of  organiz- 
ing most  of  the  branches  of  existing  insurance.  The  objec- 
tion that  the  beginning  of  the  benefits  of  insurance  depends 
upon  the  will  of  the  insured  person  himself,  has  been  an- 
swered by  pointing  out  that  this  applies  likewise  to  liability 
insurance,  where  bad  faith  in  the  person  insured  is  possible. 

An  objection  more  often  raised  than  others  is  that  of  un- 
employed strikers.  This  has  been  treated  by  separatin'g  un- 
employed strikers  from  the  unemployed  from  other  causes. 
In  some  discussions  of  this  phase  of  the'  subject  it  is  con- 
sidered that  even  strikers,  when  an  arbitration  court  organ- 
ized under  the  supervision  of  the  government  should  have 
decided  that  the  strike  was  a  just  one,  could  avail  them- 
selves of  the  insurance  just  as  though  they  had  become  un- 
employed through  the  operation  of  involuntary  causes.  This 
phase  of  the  subject  indicates  the  serious  obstacles  that  are 
yet  in  the  way  of  a  comprehensive  insurance  system  which 
shall  compulsorily  embrace  all  able  to  work,  yet  unemployed. 
The  losses  that  have  to  be  replaced  in  every  kind  of  insur- 
ance do  not  exist  as  an  effect  of  detached  events,  but  are  a 
permanent  condition  daily  created  under  the  workings  of 
society  and  daily  effaced,  with  intervals  of  greater  or  less 
severity. 

As  in  other  kinds  of  insurance,  it  is  economically  more 
reasonable  to  prevent  losses  than  to  pay  them.  Guarantees 
against  unemployment  tend,  it  is  observed,  to  render  com- 
munities that  are  paying  unemployment  insurance  at  present 
more  careful  of  the  rights  and  wrongs  of  the  employer  and 
of  the  employee,  to  stimulate  measures  that  prevent  unem- 
ployment just  as  fire  insurance  companies  assist  in  the  or- 
ganizing of  fire  brigades  in  places  where  they  do  not  exist 


266  COMPULSORY  IXSURAXCE 

and  as  the  invalid  insurance  department  of  the  government 
spends  considerable  sums  for  the  care  of  tuberculous  patients 
in  order  to  prevent  the  spread  of  a  disease  that  vsrill  add  to 
the  losses.  The  difference  between  insurance  against  unem- 
ployment and  other  branches  of  insurance  is  that  the  policy 
of  prevention  lies  open  in  a  specially  high  degree.  Xew 
questions  of  dispute  have  arisen,  as,  for  example,  what  kind 
of  work  can  be  reasonably  provided  for  the  unemployed.  Is 
not  a  watchmaker  justified  in  refusing  to  take  temporary 
work  shovelling  snow,  because  hard  manual  labor  will  thick- 
en the  cuticle  of  his  hands  so  that  he  is  disabled  from  work- 
ing at  his  delicate  trade  should  he  have  an  opportunity  to 
do  so?  Arbitration  courts  have  been  organized  in  cities 
experimenting  with  unemployment  entrusted  with  the  deci- 
sion of  such  cases,  and  their  verdicts  are  usually  recognized 
as  fair. 

The  German  delegates  to  the  International  Congress 
called  to  meet  in  Paris,  in  September,  to  consider  means  for 
combating  unemployment,  were  prepared  to  submit  to  the 
Congress  full  narratives  of  German  experience  with  contin- 
gent payments  to  unemployed.  The  delegates  include  Herr 
von  dem  Borght,  president  of  the  Imperial  Statistical  Office, 
Government  Councillor  Bittmann  of  Karlsruhe,  Dr.  Freund, 
the  chairman  of  the  Association  of  German  Labor  Ex- 
changes, Prof.  Dr.  Francke,  and  Dr.  Zacher,  a  director  of  the 
Imperial  Statistical  Office. 


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